Human Resource Management as a Driver of Organizational Performance - Essay Example

RUNNING HEAD: HEMAN RESOURCE MANAGEMENT AS A DRIVER OF ORGANIZATIONAL PERFORMANCE INSTITUTION NAME ABSTRACT In the current contemporary society, business environment is competitively changing. Most organizations find human resources as one of the source of competitive advantage that is enhanced through high performance profile. This report examines various HR practices and policies that facilitate employee development and competency. As stated by HRM theorists, there is a casual relationship between HR practices and principals and organization performance. Organization performance framework has been discussed concerning this relationship (HR policies and practices and organizational performance). In this paper, following the fact that HR practices are the integral elements of improved performance, specific examples have been detailed regarding the significance of HRM on organizational performance. INTRODUCTION According to Caliskan (2010), the strategic capacity of an aspect or an activity usually determines the vital part in organization system particularly as a source of competitive advantage. Talking of competitive advantage perhaps may not be a synchronized feature in an organization however; a sustainable competitive advantage definitely prescribes the organizational performance especially in the current contemporary world. Apparently, not all resources in the organization have the potential to create a competitive advantage. Cooke (1996) stated that for a resource to have a potential in creating a sustainable competitive advantage, it is ought to meet the following four conditions; 1) valuable, 2) non-substitutable, 3) limited and 4) imperfectly imitable. The resources satisfying these four conditions are actually superior assets that bring unique core competences in the organization. Bratton and Gold (2007) defines unique core competences as the process in the organization the entails combination of both physical and human capital in which ultimately it will be responsible for clear knowledge for the organization. It is very important again to note that performance is not only accustomed to productivity, effectiveness and efficiency or competitiveness but the overall organization performance in all fields. A number of studies as well as HRM theorists have tried to establish a clear link that exists between human resource management and performance. This has lead to a substantial cross-sectional and qualitative research on the impact of HRM on performance. Human resource policies that drive organizational performance have been developed and adopted by various organizations. A predominant theme in this paper (Human Resource Management and Organizational performance) examines identifiable strategy categories that exist in an organization as far as HRM practise and performance are concerned. Organizational Performance Framework Organizational performance is basically affected by three major human factors linked to HRM; 1) Motivation, 2) Environment and 3) Capacity. Employees need to be motivated to reach performance objective, their environment should be favourable for high performance and their skills and knowledge should be the desired for the high performance. Typically, human resource management is concerned with coming ways of accommodating people in the organization such that they achieve organizational set objectives. Mahoney and Watson (1993) derived an employee involvement (EI) model of workstation governance that showed the most valuable effects on organizational performance. The model integrates the three main factors (motivation, environment and capacity). This model of HRM (employee involvement model) states that the involvement of peoples and teams particularly in work design programs of the organization would conventionally lead to transactional mode of direction from economic to social. Therefore, decentralized decisions and rules derived from this shifting leads to increased performance where by the individuals are allowed to participate thus encouraging extensive social interchange of obligations. At the end of the day, the social exchange of obligations would enhance loyalty and dedication from employees. There is also a need to focus on the benefits of HRM practices systems (Caliskan, 2010). The logic behind this is that basically, the performance in an organization is normally enhanced by system of practices (i.e. package of HRM practices). These practices support one another as well as enhancing mutually reinforcement particularly to the contribution of workers to organization’s performance. For instance; combination of comprehensive employee training with appraisals defines employee performance and the development needs of the organization at large. Organization Performance and Strategic Human Resource Management Mitchell (2002, 2) elaborated four ways of measuring organization performance. It includes; Relevance: The level at which stakeholders consider the organization is serving the appropriate needs. Effectiveness: The level at which the organization is doing well in a road towards achieving its measurable goals and objectives. Efficiency: The degree of measure of how well resources are used (human and finance), Financial Viability: The ability of the organization to build a long-term investment. Although there are still dissimilarities across the field of human resource management on what actually contribute to high performance, a wider conformity lies on the principal objectives of human resource management which include; To open a door way to organizations in reaching their goals; Like other departments, HR department exist with a purpose (to achieve organization’s goals) and the other departments normally source strength from HRM in order to improve performance. To install required skills and abilities towards workforce efficiency; According to Ozer and Cicek (2011) the primary purpose of HR practice is to reinforce the productivity in employees. Therefore, the setting up of the required skills perhaps reinforces the performance. To enhance employee motivation, training and development; HRM theorists found that the basis of employee contribution to the organization entirely depends on motivation and development. Maximum effort provision to them would seemingly improve the performance that would reflect results proportionally. To build up and uphold quality of work life; Mitchell (2002) says that the quality of work life is very relative to the organization performance. Therefore, HR practice that forms an attractive social work environment certainly would positively impact on performance. The worldwide elements of organization performance therefore revolve around three major aspects; Increased workers skills and abilities, Endorsement positive attitudes that defines organization’s culture as well as increasing motivation in workers and staff, Giving employees expanded duties and responsibilities so as to maximise their skills and capabilities especially in the areas that needs an inclusive skills and knowledge. These universal aspects by Mitchell (2002) derive a casual direction from the importance of human resource management to determination of organizational performance. As mentioned by the first principal, HRM facilitates good understanding on goals of the organization therefore; At the enterprise point: Good HR practice attracts and retains the excellent people in the organization that would drive improved performance. It also builds up the correct attitude to employees towards various responsibilities thus building strong cohesion and teamwork. At personal level: A good HR practice promotes teamwork, provide excellent growth prospects and allow an individual to work with commitment. At the society: Scarce talents are utilized. This means that organizations treats workers well in order to reach anticipated excellent results (Bratton, 2007). Human Resources- A source of Organization’s Competitive Advantage Good performance by people in the organization leads to improved competitive advantage (Caliskan, 2010, 103). Michael Porter, the formulator of the aspect of competitive advantage, affirms that creating value for the customers by improving efficiency and effectiveness of employees would definitely lead to high performance of the organization which perhaps is translated to high competitive advantage. Human resource systems play a major role in creation of a high profiled competitive advantage. It has come to the realization to HRM theorists that the performance of employees in the organization is an essential differentiator of a business besides products and market (Caliskan, 2010). All the passive resources needs effective and efficient handling thus the productivity will all depend on the workforce inserted. According to Bratton (2007), a sustainable competitive advantage is expected to be achieved by HRM through the following strategies; Investing in people by introducing and encouraging them to engage in learning processes in order to improve their skills and abilities to meet organizations needs. HRM ensures that the required knowledge is identified for organizations needs and the steps to acquire it are put in place as well as enhancing intellectual capital. Definition of organization behaviours that needs to be exhibited in order to reach the desired results. It is important for HRM to enhance, encourage and reward these behaviours in order to improve the performance. Encouraging people to work wholeheartedly and be committed to the values and mission of the organization. There is a substantial link between human resource management and organization strategy as far as performance is concerned. The strategic role of HRM is devoted to back organization strategy (Caliskan, 2010, 105). Even so, the principal behind improved performance is basically the acknowledgment given to the human resource policies and practices that at the end of the day guides people in the organization to be more effective. The Connection between HR Policies and Best Practice (organization performance) ‘High road’ human resource management model define the importance of HRM on organizational performance through four basic set of human resource practices; a) Growing productivity by domestic training and functional flexibility Training and development is a management tool that enhances effectiveness, productivity as well as efficiency in the organization. The investment for training and development is basically made for the current and long-term performance of the organization respectively. British firms realized that when people are trained in the organizations, they seek to gain competitive advantage. Also trained and developed workers are the ingredients of improved performance and high productivity. A well trained, motivated and developed worker; Increases efficiency by producing high profiled outputs of greater value, Reduces the cost of supervision since they can scrutinize their own work with the skills adopted, Perhaps improves organization’s functional flexibility since he/she can be retained due to his/her relative multi-skills, Has the capacity to accommodate the scope of rapid changes brought by new technology and meet the product requirement for improved organizational performance. b) Outsourcing and organizational performance Human resource outsourcing involves contracting HR functions to external providers rather than performing all domestically. Gilley and Rasheed (2000) stated that outsourcing is relative to the organization performance in such a way that it enhances acquisition of non-strategic service that improves performance in a short term basis, increased flexibility and reduce cost. Sometimes, especially in the current contemporary society, organization’s paradigm shifts. As an immediate response to organizational performance, HRM outsource to meet the pressing demands. Also, the firm may need a specific knowledge thus it may respond by bringing in the new skill from the external providers. c) Organizational performance versus work intensification Bratton (2007) regards job satisfaction, commitment and motivation as the essential HR elements to organizational performance. ‘Soft’ model of human resource management perceives employees as proactive inputs of productive process (Guest, 1987). The subsets of proactive inputs include commitment, motivation, adaptability and leadership. Therefore, an HR practice that tends to strengthens employees’ responsiveness through commitment and motivation would certainly yield improved organizational performance. A critic to this model (‘soft’ HRM model) perhaps can be how these HR initiatives could be effective and whether they are major tools for improve performance? Longitudinal study by SWAGs found that employees get more attached to the new practices and related responsibilities but the commitment remains with the organization paradigm (Cully at al 1999). This implies that there is little evidence suggesting that employees are more committed to the employers. However, they are driven by the performance targets that are set by proper consultation with HRM. d) Quality initiatives versus Organizational Performance The fundamental theme in human resource management is to enhance quality. HRM theorists see quality as a vital aspect in improving organizational performance. Based on the ideological concept of Total Quality Management (TQM) which incorporate ‘soft’ HR model, quality is reached through effective leadership and constructive mutual dependency of people in the organization. A case study by Cooke (2006) has the practical implications that human resource development management is ought to carefully examine HR planning and management, employee well being and recognition as well as EI (employee involvement). Therefore, the quality comes in when HR practices in the organization analyses how these process are managed with respect to the organization performance. For example, quality initiatives like financial rewards as recognition due to positive results perhaps strengthens business strategies particularly through workers motivation. Organizational Culture and Performance Culture is basically defined from three characteristics. 1) Work done by employees and level of cooperation between them, 2) Employees behaviour that is associated with productivity and 3) A sense of integration among organizational units to feature out quality and efficiency of the departments. There is a fundamental HR practice involved especially in building up the organizational culture which will in turn impact on the performance. According to Shahzard (2012, 980), culture is attached to organizational performance on the basis that culture play a major role in improving the competitive advantage of an organization. HRM theorists establish three importance of culture to performance; Culture is strongly associated with social control and perhaps it influence employee’s behaviours. Therefore, good human resource practices would definitely affect organizational performance positively and vice versa. Culture enhances social cohesion thus employees come together and become part of corporate strategy. The role of HR practices is to build a culture that would enhance attraction of new staff as well as maintaining the performers. Culture provides employees with enabling environment that would comprehend main objectives of the organization. Human resource management plays an important role in building up quality in employees in order to sustain the culture as well as enhancing continuous improvement particularly on performance. On the basis of various HR studies, Shahzard (2012) found that HR practice should initiate practices that would make an individual easily adjust to the norms and values of the organization. This would enhance positive development in terms of performance and other social aspects within the organization especially when everyone is on the common path. Therefore, culture is relatively defined by HR practices. The aspects discussed above pertaining HR practices and organizational performance are very essential tools of HRM that it should always be adjusted to the needs, strategy as well as the mission of the organization. It is observed that training system of HRM practice is directly linked to the individual motivation. This has lead to improved performance both in the system and within people. Human resource management practices and policies in the organization have basically valued the following as far as organizational performance is concern; Customer orientation; best service rendered to customers in the organization. Effective communication and the sharing of organizational values. Reinforcement of internal relations among the employees. Teamwork and cohesion. The chart below summarises the relationship between HRM activities and organizational performance. Conclusion Generally, the HRM functions essentially focus on various functional activities of the organization in which at the end of the day drive organizational performance. More dramatic posture of HR practices is observed through a cluster of activities including organization development (employee development, motivation and training), organizational design and planning. These HR activities build up a full partnership with the organizational goals and objectives. However, there are some customs in HRM that may not be much changed. Selection, recruitment and compensation are not the noticeable practices of human resource management that directly influence performance. Therefore, the organization founds it valuable to focus on HR practices that attach significance to the organizational performance. Talk of training, work intensification, outsourcing, quality initiatives and culture as the integral elements of HR practices and policies. This is a position in HRM that define the improved performance of the organization. Reference Bratton, J., & Gold, J. (2007). Human resource management: theory and practice (4th ed.). Basingstoke [England: Palgrave. Caliskan, N. (2010). The impacts of strategic human resource management on organizational performance; journal of naval science and engineering, vol. 6, No. 2, pp. 99-120. Cisek, I. & Ozer, B. (2011). The effects of outsourcing human resource on organizational performance; The role of organizational culture; International journal of business and management studies, vol. 3, no. 2. Cooke, F. L. (2006). Training to increase productivity; a case study, Manchester School of Management, UMIST. Mitchell, H. (2002). Strategic worth of human resources; driving organizational performance. UNIVERSALIA. Shahzad, F. (2012). The impact of organizational culture on organizational performance; Interdisciplinary journal of contemporary research in business, vol. 3, No. 9, pp. 975-986. 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