How Human Resource Development Leads to Improved Individual and Organisational Performance - Literature review Example

HUMAN RESOURCE DEVELOPMENT By Name Institution Lecturer Course Class Date Introduction In modern companies, the human resource has become an extremely crucial factor in determining the competitive advantage of a business. Contemporary organisations require people to excel and must therefore equip their workforces with all the necessary skills, competencies, and behaviours in order to position themselves high in the competition ladder. Accordingly, HRD is a core organisational process whose aim is to develop a highly competitive workforce in terms of capabilities and behaviours. When properly done, HRD leads to improved individual and organisational performance. The process equips workers with necessary skills and competencies (or tools) so that they are highly effective and efficient while producing high quality products and services. The resultant is not only high employee productivity/output, but the organisation’s performance improves in terms of market competition (resulting from high reputation) and profitability (high output, increased revenues, and reduced operating costs). HRD also increases employee engagement and commitment, which lead to increased employee and consequently organisational performance. How HRD Leads to Improved Individual and Organisational Performance Defining HRD In understanding how HRD contributes to improved employee and organisational performance, it is important to define the term. Authors who have written about this organisational issue consider it as a process. Consequently, this paper will also consider HRD an organisational process. Lakshmi (2005) defines HRD as an organisational process in which workers are assisted, in a systematic manner, to improve their capabilities by acquiring new or expanding existing skills and competence. Holton and Swanson (2009) note that HRD aims at continuously increasing skills, knowledge, and capacities of employees to enable them attain personal and/or organisational goals. Therefore, one goal of HRD is enhance employee capability and performance. HRD also seeks to help employee acquire and develop desired behaviours that will in turn help them improve performance. Holton and Swanson (2009) point out that HRD is not only about expansion of capabilities, but also about behavioural change. This argument coincides with Lakshimi’s expanded definition of the concept. According to Lakshmi (2005), HRD also involves helping employees acquire new, better attitudes, perspectives, and values, which in turn lead to behavioural change for the better. The process also helps in developing an improved organisational culture designed for enhanced performance such as a culture of teamwork and collaboration (Lakshmi, 2005). Armstrong provides a comprehensive definition noting that HRD is a process in which the management provides learning, training, and development opportunities to its workforce geared towards improving individual, team, and organisational performance (2007). As the name suggests, HRD is about developing organisational workforce by helping it to develop their capabilities while adopting behaviour that is supportive of performance. Such behaviours include, for example, orientation towards teamwork and collaboration, safety, and quality excellence. An analysis of the above presented definitions shows that HRD is purposed at improving employee and consequently organisational performance through a business-led approach and within a strategic framework. HRD helps a firm to achieve its strategic goals, and this is why in contemporary businesses, it is a core part of strategic management under the umbrella of strategic human resource development (SHRD). Some of the typical HRD practices include technical/job instruction, new employee orientation, supervisory development, executive management development, customer service training, and health and safety training. Others include training on sales and marketing, teamwork and collaboration, facilitating group work, and professional skills training. All these practices are aimed at helping employees improve their performance and hence improve organisational performance. Strategic importance of the workforce in organisational performance Stiff market competition, frequent changes, technological developments, and continuous introduction of new products and services characterise today’s business world. It is so dynamic that no single business can claim to be unshakable. In order to firms to remain competitive or at least in existence, they must change with the market. The workforce has become arguably the most important strategic resource that determines whether a business will survive competition of not. Henry Ford, a prominent business person in the automotive industry, once said, “take out my building, take out my machines and all capital but leave my men with me I will become Henry Ford again” (Khurana, Khurana & Sharma 2010: 1). By this statement, Ford meant that organisations require people (employees) to excel. Therefore, employees are not simple strategic assets at the disposal of an institution, but core part of it. HRD is therefore a crucial strategy of helping businesses to excel with people. More organisations have realised the importance of HRD and have consequently developed it as one of the core, strategic functions/processes. Today, business people and executive managers have actively considered HRD as the center of operation of all other organisational functions, and the cardinal to improved productivity, enhanced profitability and improved employment relations (ER). Consequently, firms are investing adequately on HRD and results have been promising in terms of improved competitiveness. HRD leads to improved individual and organisational performance indirectly through behavioural change Employment relations Literature on HRD supports the hypothesis that strategic human resource development (HRD) leads to improved individual and organisational performance. Radhakrishna and Raju (2015) sought to investigate the effect of HRD on employment relations. The former refers to the relationship between employees and their employers, which in turn fundamentally affects organisational performance. According to Radhakrishna and Raju (2015), ER skills are seen as being crucial in improving employee involvement, work engagement, and commitment. Therefore, strategies that improve ER in the workplace end up enhancing organisational performance. The researchers conducted the study using Vizag Steel, a large, Indian steel firm. The study, which spanned over 10 years (between 2004 and 2014) indicated that HRD activities positively affected ER in terms of reduction in grievances, and disciplinary cases. Findings of this study suggest that HRD helps employees to acquire desirable behaviours, attitudes, and values, which then result to improved employee performance. Eventually, the organisation benefits through enhanced performance. Employee engagement Employee engagement is a term that describes the relationship between employees and their employing organisation. Employee engagement is a crucial determiner of employee performance and hence organisational success. Engaged employees are highly enthusiastic about their jobs and are therefore fully absorbed into it. Accordingly, they actively take necessary steps to ensure that they achieve best outcome, for example, in terms of quality (Phillips 2009). Engaged employees are highly concerned about the reputation and success of their organisation. Therefore, everything they do is in the best interest of the employer (Reilly & Williams 2006). This means that highly engaged workers will outperform those who have low levels of engagement. As Phillips (2009) notes, highly successful companies have highly engaged employees who do not hesitate to present their ideas for development into innovative products and services (Reilly & Williams 2006). Therefore, improving employee engagement is a vital antecedent of improved organisational performance. A number of factors affect employee engagement, some of which are associated with HRD. Reilly and Williams (2006) outline eight key drivers of employee engagement. The most notable for this paper is the existence of development opportunities (Reilly & Williams 2006).Phillips (2009) also noted that opportunity to learn and grow has a fundamental impact on employee engagement (Reilly & Williams 2006). When employees are given development personal and career development opportunities, they feel that their employer values them and their contribution in organisational success. In addition, development opportunities such as training programs aimed at improving employee’s skills and competencies enable workers to complete their tasks more effectively and easily. It is tantamount to provision of required tools and equipments to complete tasks, which have also been found to improve employee engagement (Reilly & Williams 2006). In this conceptualisation, skills and competencies are equated to necessary tools and equipment. Indeed, when workers are unable to complete assigned tasks because of lack necessary skills, stress levels increase resulting to high turnover rates (Hulme 2006). Since employee development is a core HRD task, it means then that the former is crucial in improving employee engagement. Studies have indeed confirmed that HRD practices have a positive influence on employee engagement. Shuck and co-researchers undertook a study to investigate the relationship between HRD practices and employee engagement. Their study was based on the social exchange theory. Using a sample of 207 employees from the healthcare industry, regression analysis of collected data showed a negative correlation between participation in HRD practices and behavioural, emotional, and cognitive engagement (Shuck et al. 2014). The study therefore promoted the hypothesis that participating in HRD practices such as on-the-job training, safety and health training, and teambuilding activities improves employee engagement. As earlier mentioned, the consequent is improvement in employee performance, which in turn scales up organisational performance. Highly engaged employees have a low intention to leave a company. As such, improving employee engagement lowers workforce turnover, an association that Shuck and colleagues (2014) found in their study. High employee turnover is directly and indirectly costly to an organisation. Its direct costs include high human resource (HR) costs owing to the need to hire new employees. The recruitment process is costly considering that the company will advertise new vacancies, shortlist candidates, interview potential employees, and train those who are selected. Indirect costs include loss of skills, possible loss of customers, and loss of competitive advantage to rivals who hire those employees. When workers leave, they go away with their skills that they give out to competitors. In addition, as Cascio and Boudreau (2011) argue, employees may leave with customers. This risk is especially high for first line employees in service businesses who provide services to customers. In such cases, clients establish strong links with employees such that the former know certain employees to be their service provider instead of the company (Bias & Mayhew 2005). Any strategy that promises reduction in staff turnover is therefore a strategic asset to any business in the contemporary world of business because it would save the company huge, direct and indirect costs. On the same note, any activity or process that helps a firm to retain its workforce for as long as possible is a crucial competitive tactic because it would enable the company to retain its skills and use them for innovation and leveraging its performance and competitive position. HRD is one such strategy that helps in workforce retention through increase in employee engagement. Consequently, it helps a business to improve its performance. Employee commitment Another immediate outcome of HRD is employee commitment. Researchers (Boon & Kalshoven 2014; Coetzee, Mitonga-Monga & Swart 2014; Istrazivanje et al. 2014; Sung & Choi 2014) have established a positive relationship between organisational investment in HRD practices and increase in employee commitment. In their study to investigate the impact of various HRD dimensions on organisational performance, Sung and Choi (2014) found that qualitative dimensions enhance employee competence and commitment. The qualitative dimensions comprises of management support for HRD and its perceived benefits (Sung & Choi 2014). These findings were in line with the social exchange theory, which postulates that investing in and supporting employee training and development instills a sense of caring for the workforce. This in turn induces in employees a feeling of attachment to the company (Slack, Corlett & Morris 2015). In turn, employees feel that they are obliged to return the favor by committing themselves fully to organisational tasks (Slack, Corlett & Morris 2015). Employee commitment is defined as the relative strength in which a worker identifies and involves him or herself with the employing organisation (Harper, 2008). There are three core elements of this concept, which include: (1), strong belief in the company’s values and goals and consequent acceptance of them, (2) employee’s willingness to spend considerable amount of effort for the success of the company, and (3) a strong desire to be a member and associated with the organisation (Harper, 2008). The three forms of employee commitment can be summarised as compliance, internalisation, and identification respectively. Based on the social exchange theory explained above, providing training and development opportunities makes employees establish a strong attachment with the business thereby increasing employee commitment. Indeed, a study conducted by Ojibade and Ayinla (2014) confirmed this hypothesis. In their cross-sectional study using a Discount House in Lagos, Nigeria, the researchers collected data using questionnaires from 150 employees. After conducting a regression analysis, they found that employee training was associated with improvement in employee commitment to the company (Ojibade & Ayinla 2014). Although the study used a single organisation, which makes it difficult to universally apply its findings, it supports similar studies on the same issues (for example, Sung & Choi 2014). Based on the definition of employee commitment and its dimensions as explained above, it is theorised that it leads to improved organisational performance. In particular, the second dimension, willingness to spend considerable amount of effort for the sake of organisational goals, which stems from the second dimension, strong belief in organisational goals, leads to improved organisational performance. When employees develop high levels of organisational commitment, they strongly believe that set company goals are achievable. Consequently, they do everything possible at their disposal to help the firm achieve its goals. Literature on this organisational issue shows that there is a positive correlation between employee commitment and organisational performance (Khan 2015; Lee, Chen & Lee 2015). Although Chen, Lee and Chen’s study is on charismatic leadership, it provides crucial insights on the relationship between employee commitment and organisational performance wherein charismatic leadership is the mediating factor (2015). The baseline is that employee commitment is associated with improved organisational performance resulting from improved workforce motivation to achieve company goals. HRD leads to improved individual and organisational performance directly through enhancement of employee capability From the definitions of HRD provided at the beginning of this paper, the primary role of the process is to improve employees’ capabilities through acquisition of new skills and competencies as well as developing of existing ones. In doing so, HRD directly contributes to improved employee and organisational performance. Khurana, Khurana and Sharma (2010) highlight factors affecting employee productivity. Some of them include possession of necessary skills and competencies, also known as intellectual tools. Even if the organisation provides its workforce with up-to-date tools and equipment for work, lack of knowhow on task completion and/or use of technology leads to low productivity or in the worst case scenario inability to complete task at all. Therefore, workers will not perform optimally and this will lead to loss of resources and low organisational performance. In addition, unskilled workers are highly likely to produce low quality work leading to low organisational performance in terms of high waste and low customer satisfaction. For example, consider an employee who does not how to use certain software properly. When serving customers, the employee will spend a lot of time leading to waste of resources (time in this case). In addition, workers will be discontented because of the long waiting time, which may lead to loss of clients. In another example, if an engineering company hires an incompetent welder, all welding jobs will be done poorly. Probability of product failure will be high because of wrong welding and perhaps use of wrong material (welding rod) to do the job. Product return rate will be high leading to excessive wastes while customer satisfaction rates will fall leading to loss of customers. The company will lose financially in terms of loss of customers and rise in operating costs resulting from the cost of low quality jobs. However, if these two employees were helped to acquire necessary skills, they would be highly effective and efficient while producing high quality products and services. Therefore, helping the workforce to acquire and polish their skills results to a high skilled human resource characterised by high efficiency, effectively, and productivity (output per unit time). Other benefits include high quality performance and being innovative. Consequently, the firm gets short and long-term return to investment. Short-term benefits include improved employee productivity and consequent high output, which drives organisational profitability up. Increase in quality performance cuts down costs by eliminating cost of poor performance and this drives up a company’s profits. Indirect, long-term benefits include high innovation, ability to produce cutting edge products and services, and earning a reputation of quality and innovation. This is the reason why leading firms such as Google, Apple, and Deloitte are investing handsomely on employee training and development to provide their workforce with the best skills in the respective industry. For instance, Deloitte believes that its employees are its equipment. Failure to invest in them by helping them acquire latest skills is planning to fail (Quast, 2012). While this strategy may appear expensive and economically infeasible in the short-term, its long-term benefits far outweigh its costs. Conclusion The primary goal of HRD is to improve employees’ capability while promoting behavioural change to one that promotes employee performance. Consequently, employee performance increases leading to increase in organisational performance. Direct benefits of HRD include enabling workers to sharpen their working skills making them more productive, efficient, and effective. Employees also gain new skills thereby expanding their capabilities, which result to improved employee performance. Indirectly, HRD improves employee commitment and engagement, which are then associated with increased performance. In the contemporary world of business characterised by intense competition, organisations must invest in HRD wisely. Although the process might be expensive in the short-term, its long-term benefits far much outweigh the cost of investment. Bibliography Armstrong, M 2007, A handbook of human resource management practice (10th ed.). London: Kogan Page. Bias, GR., & Mayhew, DJ 2005, Co-justifying usability: An update of an internet age. Sydney, Australia: Elsevier. Boon, C., & Kalshoven, K 2014, How high-commitment HRM relates to engagement and commitment: The moderating role of task proficiency. Human Resource Management, vol. 53, Iss. 3, pp. 403-420. 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