Human resource management and organizational performance

1. HOW DO HR POLICIES AND PRACTICES AFFECT PERFORMANCE?

If we accept that there is sufficient evidence to claim that HR policies and practices do affect company performance (although some studies, for example Lahteenmaki and Storey 1998 do not support this) then we need to understand better the processes which link these HR practices to business performance. As Purcell et al. (2000) point out, ‘what remains unclear is what is actually happening in successful organisations to make this connection’ (p. 30). Job satisfaction was for a long time seen as key and some evidence was produced to support this (see, for example, Patterson et al. 1997). However, more generally, connec­tions between this and organisational performance did not prove fruitful and the focus moved to commitment (Guest 2002) in mediating the impact of HR policies and practices on business performance. In addition to commitment researchers have also identified motivation as the mediating mechanism and some identify trust and morale. Purcell and his colleagues (2003) give equal prominence to job satisfaction and motivation and commit­ment. In their model HR policies and practices are seen to impact on employee ability/ skills, motivation and incentive (in that people can be motivated to use their ability pro­ductively via intrinsic and extrinsic rewards) and opportunity. In turn these three factors have an impact on commitment, individual motivation and job satisfaction, all of which have an impact on employee discretionary behaviour which in turn impacts on per­formance. Their ‘People and Performance’ model is displayed in Figure 11.1.


The search continues to explain better the mediating variables which encourage employees to perform at a high level, but as you will see from this chapter there is much overlap between the key mediating variables proposed to date and the idea that there is an ‘answer’ to be found may well be an illusion.

The Window on practice below gives an example of satisfaction being used as an explana­tory variable, and given the prominence of commitment and motivation we will consider these in more detail next. We conclude this section with some key themes of current enquiry in explaining how HR policies and practice impact on employee performance.

1.1. Commitment

Commitment has been described as:

  • Attitudinal commitment – that is, loyalty and support for the organisation, strength of identification with the organisation (Porter 1985), a belief in its values and goals and a readiness to put in effort for the organisation.
  • Behavioural commitment – actually remaining with the company and continuing to pursue its objectives.

Walton (1985) notes that commitment is thought to result in better quality, lower turnover, a greater capacity for innovation and more flexible employees. In turn these are seen to enhance the ability of the organisation to achieve competitive advantage. Iles, Mabey and Robertson (1990) add that some of the outcomes of commitment have been identified as the industrial relations climate, absence levels, turnover levels and individual performance. Pfeffer (1998) and Wood and Albanese (1995) argue that commitment is a core variable, and Guest (1998, p. 42) suggests that:

The concept of organizational commitment lies at the heart of any analysis of HRM. Indeed the whole rationale for introducing HRM policies is to increase levels of commitment so that other positive outcomes can ensue.

Marchington and Zagelmeyer (2005) suggest that most studies explaining an HRM- performance link use some variant of the high commitment model. Hence we see the adoption of the terms ‘high commitment work practices’ and ‘high commitment man­agement’ and their linkage with high performance. Meyer and Allen (1997) argue that there is not a great deal of evidence to link high commitment and high levels of organ­isational performance.

Some authors, however, have argued that high commitment could indeed reduce organisational performance. Cooper and Hartley (1991) suggest that commitment might decrease flexibility and inhibit creative problem solving. If commitment reduces staff turn­over, this may result in fewer new ideas coming into the organisation. Staff who would like to leave the organisation but who are committed to it in other ways, for example through high pay and benefits, may stay, but may not produce high levels of performance.

As well as the debate on the value of commitment to organisational performance, there is also the debate on the extent to which commitment can be managed, and how it can be managed. Guest (1992) suggests that commitment is affected by: personal characteristics; experiences in job role; work experiences; structural factors; and personnel policies. This suggests there is a limit to the extent to which commitment can be manipulated.

More recently the emphasis on commitment is being downplayed as new areas of understanding are opening up, and old ones are being revisited.

1.2. Motivation

Until the 1980s performance was usually construed as the output of a combination of ability and motivation, given appropriate resources, and hence motivating others became a key part of most management skills training. The word motivation is gener­ally used to reflect the effort or drive that an individual puts into an activity. In spite of more recent attention to commitment, motivation is still considered to be an important influence on performance. It is not our purpose here to recount any motivation theories in detail (for this see texts such as Huczynski and Buchanan 2007; Mullins, 2006; Fulop and Linstead 1999; or Hollyforde and Whiddett 2002), but below we identify some of the key concepts addressed in motivation theories and suggest how HR policies and practice can influence motivation and potentially performance. Some theories of motivation emphasise the needs that individuals are motivated to fulfil (such as an adequate standard of living, recognition for good work, social activity and so on) and these are referred to as content theories of motivation. If work is constructed as an opportunity for these needs to be fulfilled then greater effort at work is predicted. Other theories explore the process of motivation. We draw on both types of theories here.

  • Importance of the work itself. Maslow (1943), Herzberg (1968) and Hackman and Oldham (1976), for example, all underline the way in which individuals are motiv­ated to seek and may achieve satisfaction through their jobs. Herzberg, for example, identifies how opportunities for achievement, recognition, responsibility, autonomy, challenging tasks and opportunities for development may all be motivational. There are clear possibilities for HR policies and practice in this area. For example this would include policies on job design, empowerment, training and development and career development.
  • Social needs are important. Maslow (1943), Mayo (1953) and McClelland (1971), among others, highlight the need for affiliation as a motivational factor. These needs are likely to be met by policies to incorporate teamwork and involvement generally.
  • Reward cannot be ignored. For most employees pay is important, if not a sufficient motivator. Maslow (1943) recognizes the need to have sufficient money for basic needs, and Herzberg (1968) suggests that whilst pay may not motivate per se it does have the ability to demotivate if not sufficient. So policies which ensure that pay and benefits are comparable with, or greater than, competitors are likely to have some motivational value.
  • Expectancy has an impact on motivation. Vroom’s (1964) expectancy theory of motivation recognises that in the process of motivation the extent to which the indi­vidual feels he or she can realistically achieve the target will have an influence on whether he or she is motivated even to try, so policies which enable individuals to agree targets would be appropriate. Communication, empowerment and involve­ment policies would have some impact here.
  • Different people are motivated by different things. Expectancy theory, previously mentioned, also identifies that different individuals value different things and hence have different motivational needs. In the process of motivation, only those things that the individual values will spur them to act. So, for example, policies on work-life balance and time flexibility will be motivational for some people, whilst for others promotion policies may have more impact. Policies which enable managers to really get to know those who work for them would be appropriate here as well.
  • Social context influences motivation. Recent work in the area of motivation suggests that motivations are socially or culturally determined, and this reinforces the issues identified in the point above.
  • The influence of the line manager is key. McGregor (1960) argued that workers were basically motivated to be responsible and perform well. He suggested that if you treat people as responsible and self-motivated then they will act in a responsible and motivated manner. On the other hand if managers treat employees as if they are irresponsible and are basically work shy then they will act as such. The role of the line managers is increasingly seen as key and we discuss this in more detail below.

We have indicated how HR policies and practice can tap into employees’ motivation, but, just as with commitment, there is a limit to which individual motivation can be manipulated. For example, some people have less internal energy and drive than others and less need for growth. Also, individuals with high levels of energy and drive may satisfy these outside the work environment. While we may try to motivate people externally the greatest power for motivation comes from within and is therefore under the control of the individual rather than another. The best we can say is that managers can enhance employees’ motivation by the way they treat them, and at worst managers may neu­tralise the motivational energy in their followers. There will always be some factors on which managers and organisations have no impact whatsoever.

2. CURRENT DIRECTIONS IN HRM-PERFORMANCE THINKING

We have identified a number of problematic aspects of the research to date in under­standing the HRM-performance link. These have led to some slight changes in direction in order to develop our understanding of the issues. Key themes of interest are focused on exploring the discrepancy between intended and implemented HRM practices and the key role of the line manager; investigating the sustainability of high-performance work practices, and exploring alternative mediating variables. Underpinning each of these is a focus on understanding employee perceptions in relation to HRM, an area which has until recently been widely neglected (see, for example, Boselie et al. 2005). Hope Hailey et al. (2005) suggest that their research demonstrates the need to incor­porate the employee voice into conceptual models of the HRM-performance link, and Kinnie et al. (2005) propose that ‘the fulcrum of the HRM-performance causal chain is the employees’ reactions to HR practices as experienced by them’ and they go on to say that this is what drives discretionary behaviour.

In considering the employee view we are cognisant of the impact that line managers have on this, particularly in view of the continuing trend to devolve HR activities to the line, which we discuss in more detail in Chapter 32. Employees are influenced not so much by the way policies are intended to operate but by the way they are actually implemented (Kinnie et al. 2005) as this affects the meaning and sense that employees make of these policies and will affect their behaviour and performance (Hutchinson and Purcell 2003). It is therefore critical that line managers buy into and understand HR policies and implement them appropriately and fairly. As Richardson and Thompson (1999) suggest, there is a need to know if the HR practices ‘are . . . pursued by managers with equity, vigour and belief’.

Research however suggests that line managers often have differing interpretations of HR policies as they are often not precisely defined, and that the managers themselves are not adequately prepared for implementation (see, for example, Renwick 2003). Lack of consistency and perceived access to, and fairness of, policies as implemented by line managers are likely to damage employee attitudes, behaviours and performance, and employee dissatisfaction with policies has been shown to have a greater impact, in terms of lowering commitment, than the absence of policies (Purcell et al. 2003). Purcell and his colleagues provide an example of two Tesco stores each operating the same Tesco HRM policies but with very different performance levels. In this particular case the line manager’s role was identified as key in the way the policies were delivered and the con­sequent impact on employees and their performance.

The employee view is highly relevant not only in understanding how implementation of HR policies may vary from intention and the line manager’s role in this, but also in understanding the response to policies that are implemented as intended. Increasing attention is being given to the sustainability of high-performance work practices. High-performance work practices vary in their nature, and some approaches have been criticised as a form of work intensification, and whilst these practices may provide short­
term gains they do not provide a sustainable approach to increasing performance. In parallel with this there is a growing body of knowledge which until recently has not been reflected in the HRM-performance research, and this focuses on happiness and well­being. Such concepts are attracting considerable general attention of late. Guest (2002) argues that such concepts need to be built into the HRM-performance relationship and there is some evidence of their integration (see, for example, Peccei 2004). For example there is currently greater interest in practices such as work-life balance and support for physical and mental well-being, the argument being that such practices improve performance. Case study 11.2, ‘BT launches UK’s biggest mental health drive’, on the com­panion website, www.pearsoned.co.uk/torrington focuses on well-being and aspects of performance. However an alternative school of thought suggests that the combination of work-life balance practices and high-performance practices is contradictory. The combination of these practices therefore remains a challenge.

3. MAJOR PERFORMANCE INITIATIVES

We have previously considered some HR policies and practices that have been identified as related to high performance, and have noted the idea of using practices in bundles. Many of the popular performance initiatives that companies have adopted represent similar (but not the same) bundles of HR policies and practices, and we now turn to these. There are many small initiatives every day that help to improve performance, but we are concentrating here on major strategic initiatives although the labels may, of course, mean different things in practice in different organisations. Interestingly, Guest and King (2001) found that many senior managers were not aware of the research on performance, and it is therefore unclear what is informing senior managers’ choice of performance initiatives.

This brings us to the concern that too many initiatives in the same organisation will give conflicting messages to employees, particularly when they are introduced by different parts of the business. There may, for example, be contradictions between the messages of total quality management (‘right first time’) and those of the learning organisation type of approach (‘it’s OK to make mistakes as long as you learn from them’).

The performance research to date focuses very much on the individual, but we agree with Caulkin (2001) who suggests that organisations also need to develop the capability of the organisation as a whole, and to this end we include in Table 11.1 three levels of initiative depending on the primary focus: organisational, team or individual. Some of them cover some of the same ground, and it would be surprising to find them in the same business at the same time. In Chapter 14 on Leadership and change we discuss the intro­duction of practices such as these into the organisation.

Source: Torrington Derek, Hall Laura, Taylor Stephen (2008), Human Resource Management, Ft Pr; 7th edition.

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