Impact of High-Performance Work Systems on Individual and Organizational Performance - Literature review Example

Impact of High Performance Work Systems on Individual and Organizational Performance Name: Tutor: Course: Date: Introduction The report explores the relationships between high performance work systems and individual or organizational performance. High Performance Work Systems (HPWS) are interconnected but separate human resource practices in employee in recruitment, selection, development, motivation and retention. They enhance employee abilities, skills, knowledge and opportunities to complete their jobs. Argyris (2000) notes that high performance work systems are primary designed to increase organizational performance and improve employee relations. This can happen through consultation and communication between employees and the management. However, Godard (2004) contends that there are a range of variables that may constitute the high performance work systems in various organizations than earlier thought. Some of them include security, contingent rewards, selective hiring, transformational leadership, high-quality work and decentralized decision making. Effective HPWS requires appropriate incentives, selection and training policies to guarantee skilled workforce and the opportunity to participate in decision making (Appelbaum et al. 2000). Organizations have actualized HPWS through collaboration of team leaders, supervisors and line managers. The report has found out that HPWS affects organizational and individual performance. The management uses these set up to influence employee behavior, attitudes and beliefs. It also considers the quality of relationships between team members and line managers. High Performance Work Systems High Performance Work Systems also termed as high commitment organizations or high involvement is used by organizations to enhance high performance through people by way of distinctive managerial approach. Description of HPWS is different among HRM authors who emphasize slightly different management practices and features (Collis & Montgomery, 1995). The essential characteristics are described through seven key dimensions provided by Jeffrey Pfeffer. These are; employment security, extensive training, high compensation contingent on organizational performance, reduced barriers and status distinctions such language, dress, wage differences, office arrangements across levels (Pfeffer, 2003). Others are hiring of new personnel selectively, decentralization of decision making and self-managed teams as key areas in organizational design. Finally, it involves extensive sharing of performance and financial information across the organization. The key objective of HPWS is not in employee control but creation of an organization based on employee empowerment, commitment and involvement. Companies reflect varying sets of managerial practices, since small business unit involves everyone in the business and controlling its own fate is the best identity for the involvement oriented approach. Pfeffer (2003) observe that organizations reflecting high employee involvement become successful and feel responsible. They simply gather more knowledge, engage in more actions and contribute more (Ashforth & Humphrey, 2005). Such organizations have knowledge, power; rewards and information perform at the highest level. Some of the successful firms using this approach are BHP Billiton, Shell, Men’s Wear house, Procter and Gamble, Virgin Atlantic and Wal-Mart. Workers are to a large degree in HPWS are self-managed and self-controlled. HPWS workers with the help of leaders develop a clear goals, mission and vision to respond to amorphous ways to changing circumstances (Milgrom & Roberts, 1992). Since HPWS is a participative management to the nth magnitude, employees shed the mentality of agents and perceive themselves as owners in their outlook. Empirical Studies: Performance Superiority The initial studies of the auto industry by researchers carried out a comparison of auto plants with traditional mass production methods and those with flexible or lean production methods. The study obtained that as opposed to mass production, flexible production methods emphasize on the use of employee involvement and teams are associated with productivity and higher quality (Collis & Montgomery, 1995). Secondly, human resource policies in a major steel industry study rated the firms on a one to four scale. One represented progressive while four stood for the traditional Tayloristic approach. It was obtained that those firms with more progressive management system operated their lines at significantly lower costs and higher proportion of the time. Thirdly, index of participation was used in a study of fifteen semiconductor fabrication plants based on four elements; reward, power, knowledge and information (Ichniowski & Shaw, 1999). The study obtained that there was a clear linear relationship between participation index and the three performance indicators; cycle time, defect density and line yield. Finally, in another study involving an oil refining company, it was established that a trained, committed and multi-skilled workforce pays off in higher refinery utilization and reduced maintenance expense. Collective internally and interrelated consistent human resource practices were observed by John Paul MacDuffie (1995) and found that they had a relationship with quality and productivity in sixty two auto assembly plants across the world. Some plants used HR parameters linked to mass production of low commitment policies and narrow division of labor. Other plants utilized HR parameters linked to flexible productions systems of multi-skilled orientation such as high commitment policies, worker performing quality tasks, job rotation, suggestions and greater use of teams (Ichniowski et al. 2007). The study obtained statistically strong significant evidence that supported the hypothesis that innovative parameter of HR practices was positively associated with quality and productivity. The study on steel production lines drew similar conclusions (Godard, ‎2004). It found that in the thirty six homogeneous steel finishing lines, clusters of complementary HRM practices were associated with productivity. Four systems of HRM practices identified as system one that in all HRM policy areas, innovative practices were incorporated. The second system added high worker involvement and extensive skill training in teams. The third system enhanced labor-management communication practices and worker involvement in teams. Finally, the fourth was a traditional system with no innovative practices (Pfeffer, 2003). Time not involving delays was measured by the percentage of uptime to determine productivity. The evidence indicated a positive association between systems of innovative HRM practices and worker productivity with changes in individual HRM practices showing no or little effect. Ichniowski and Shaw (2009) in a similar study established a performance difference between US steel manufacturing and Japanese companies. The US companies used the four levels of HRM systems from innovative and traditional while the Japanese firms used HRM systems of problem-solving teams. The teams had high levels of labor-management communication, training, flexible job assignments, careful employee selection and employment security. The study found that Japanese steel companies demonstrated better performance in both product quality and productivity than the US companies (Ichniowski & Shaw, 2009). On the contrary, the US firms that used innovative HRM systems came close to the quality performance and equaled the productivity of the Japanese firms. Organizational citizenship behavior (OCB) of employees is enhanced by attitudes which are also related to empowerment, organizational commitment and job satisfaction. Performance of most departments in an organization is affected both citizenship behavior of employees and directly by HPWS. Behaviors and attitudes of individual employees are built through an effective HR system. The HR system is likely to influence on departmental performance and enhance a more positive work place environment (Harzing & Pinnington, 2010; Huselid, 2005). Organizations are investing in performance management processes, information sharing, selection, training and compensation which positively effect on behaviors and employee attitudes. They pay further dividends with performance and higher service quality. There is need to pay attention to the role attitudes play besides highlighting the importance of results-based management where good behaviors shapes better results. Improving the performance of employees is one of the core beliefs to changing their behavior (Ichniowski et al. 2007). Organizational commitment and job satisfaction are strong drivers of behavior. Organizations need to evaluate and consistently measure commitment and satisfaction of their employees. Impact of HPWS on organizational performance: BHP Billiton Strategies have been developed to gain competitive advantage and offer something new and different. Innovation strategy is important where services or products offered by the organization are different from those of competitors. Enhancing service and products quality becomes the principal focus of quality enhancement strategies in HPWS. Ichniowski and Shaw (2003) affirm that by being the lowest cost producer, cost minimization in firms is typically an attempt to gain competitive advantage. Innovation strategy is important for coordination with other groups and jobs that require close interaction. Group achievements through performance appraisals are a reflection of a long term focus and skills development. It is also influenced by flexible pay arrangements and compensation schemes that emphasize on internal equity. In organizations, broader career paths reinforce long term exchange, cooperation and development (Kling, 2005). Quality enhancement strategy provides for explicit and relatively fixed job descriptions, continuous and extensive training and development, job security and egalitarian treatment of employees. BHP Billiton is one beneficiary of HPWS in the way it has influenced employee behavior and attitudes. The company offers attractive pay package and benefits. In addition it has provided a safe operating environment for employees, sustainable environmental practices and safety of employees and contractors. Most of its assets are world class that encourages and retains employees. Harley (2012) observes that the helm of the corporation and petroleum business is good leadership and plenty of opportunities for career growth and reward schemes. On the contrary, BHP Billiton is still burdened by bureaucracies and draconian processes. In the recent administrations, employees were discouraged from the culture of fear that made many to take sick off or vacations for the fear of being dismissed from work. Though its work-life balance is not desirable, it offers career progression, travel and excellent benefits. With many layers of management, upward progression is very slow. Employees determined to get promotion will have to contend with long work hours (Lewin et al. 2010). High performance work systems promote integration of human resource practices through training and development, intensive recruitment, teamwork and decentralization. BHP Billiton has expanded to more than ten countries which have varying external environments. It applies the Fair Work Act, 2009 with regard to employment relations. Current Australian financial performance is affecting the high performance work systems in the organization. To overcome this challenge, the company has aligned HPWS to be congruent with its strategy, culture and industry environment in ensuring sustainable performance. Many BHP Billiton employees contend that it’s a great environment to work with great people. However, some employees still find difficulty in travelling to work at night despite making suggestions to the middle management. According to Boxall and Macky (2008), HPWS aim to empower employees to make better decisions, reward them and enhance organizational knowledge. Most organizations in Australia have adopted HPWS to achieve benefits and increase employee participation. Datta et al. (2005) supports this notion that HPWS enhances the commitment level of organizations by giving employees the opportunity become flexible at work and increase their creativity levels. It has already been established that training and development, selection and recruitment are integrated to engender high levels of performance. Motivation through attractive compensation, flexible time offs and employee mutual helpfulness has made BHP Billiton a high performance work environment. These have also encouraged higher levels of job satisfaction, empowerment and organizational commitment. Becker and Gerhart (2007) argue that lack of communication between departments is causing confusion among employees. Performance levels are tied to human resource management practices. At BHP Billiton, people are prioritized. Labor productivity and high performance work systems are moderated by industry growth especially in high-growth industries. Balanced scorecard measures smaller scale objectives of the company vis a vis their vision and strategy. BHP Billiton reports the annual profits to shareholders by ensuring attractive dividends. The company also appears reliable and consistent in delivering products like precious metals and petroleum products to customers. It has also devoted a sizeable budget to research and development as well as efficient procurement, mining, processing and distribution systems. All these are aligned to its vision and strategy through objectives, measures, targets and initiatives (Becker & Gerhart, 2007). To optimize on the balance scorecard, the company has invested in its processes, technology, innovation, suppliers and customers. Unionism affects organizational performance by decreasing productivity, investment, restrictive work practices and negative industrial relations climate. This addresses the fact that BHP management is self-centered and less on employee work-life balance. Despite these gains, BHP is risk aversive and not willing to take chances on incremental change. They are interested in transformational changes and neglect moderate successes. Being process oriented, it is difficult to become a first mover and innovator (Martin, 2008). Impact of HPWS on individual performance High performance work systems create a positive work environment to individual employees. They derive the opportunity for autonomy and control of one’s work. It also includes the opportunity to use one’s skills at work and maximize the clarity of communications with respect to job expectations (Godwyn & Gittell, 2011). Improvements in employee well-being such as fatigue, negative-work home spillover, job-induced stress and job satisfaction are connected to high performance work systems. Boxall and Macky (2008) affirm that positive employee outcomes are predicted by high involvement through perceptions of greater exposure to practices. Some of the outcomes are better work-life balance, low stress and fatigue and higher job satisfaction. Autonomy of individuals to work reduces stress and fatigue while rewards linked to performance accrue to lowered work-life imbalances. Individuals also found out that longer hours and work intensification increased their stress and work-life imbalance (Ashkanasy et al. 2012). Individual employees are motivated by ideological concerns, simple compulsion and instrumental considerations. In the case where companies emphasize on high performance and poor job motivation, unions intervene to allocate these inefficiencies and demand increased wages which are above the market clearing rates. Employees are demanded by unions to strike hence affecting their technical efficiency. They are likely to reduce their productivity and impose restrictive work practices. Burchielli, Bartram and Thanacoody (2008) argues that work conflicts with the family given that an employee has to make personal sacrifices to work in order to meet work and family expectations. Some institutions demand undivided and exclusive loyalty as they attempt to reduce claims of status positions and competing roles. Work-life balance affects organizational productivity. Harley (2012) argues that supervisors and HR managers in charge of selection, training, recruitment and employee development should be interested in employee motivation through a balance of work and family activities. BHP Billiton provides one month paid holiday for its employees to join and celebrate with their families. Work-life imbalance is connected with increased cases of burnout, stress, intention to leave and reduced employee performance and organizational commitment (Bateman & Snell, 2006). BHP Billiton in order to sustain its workforce needs to ensure and implement effective work-life balance practices. There is limited chance for diverse workforce to ascend up the promotion ladder owing to the culture of strategic managers (Harley, 2012). Despite these challenges, BHP offers individual employees attractive salary, great work environment, a future and opportunities to learn. Conclusion The report has established that poor performance among employees is more likely to result from dissatisfaction in their jobs and lack of commitment to the organization. Crappy system of practices or HR practice is most likely engendered by lack of satisfaction and commitment. To improve performance, attitudes and behaviors, the organization should fix the systems and Stop blaming employees. Some empirical studies have investigated the potential of organizations using specific HPWS managerial practices as attaining higher level of performance as opposed to traditionally managed organizations (Ashforth & Humphrey, 2005). On the contrary, fewer studies focused on groups of HPWS practices by examining the magnitude at which they could be linked to high financial and operational performance. Based on Japanese firm studies, it was established that HPWS positively impacted on individual and Organizational Performance. BHP Billiton, an Australian mining firm using HPWS has become a competitive organization after advancing a mixture of individual and results orientation or group incentives as well as high levels of employee involvement in immediate jobs. Through cost minimization, BHP relatively applies explicit and fixed job descriptions that allow little ambiguity even at minimal levels of training and development (Tomer, 2006). The report has shown that HPWS strategy offers short term results orientated by performance appraisals and close monitoring of market pay levels. Finally, when companies attempt to reduce costs to a minimum, they define career paths and jobs emphasizing on expertise, specialization and efficiency (Milgrom & Roberts, 1992). Reference list Appelbaum E & Batt R 2000, High Performance Work Systems: American Models of Workplace Transformation. Washington, D. C.: Economic Policy Institute. Argyris C 2000, Understanding Organizational Behavior. New York: John Wiley. Ashforth B E & Humphrey R H 2005, Emotion in the Workplace: A Reappraisal, Human Relations Journal, 48(2), 97-125. Ashkanasy N M Charmie E J Zerbe W J 2012, Experiencing and Managing Emotions in the Workplace. Journal of Organizational Behavior. 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