Human Resources Managementand Organizational Performance - Literature review Example

HRM and Organizational Performance Name Institution Tutor Date Introduction Human Resource Management (HRM) is a strategic organizational function that deals with the best possible recruitment, management and direction of staff towards organizational goals (Cania 2014). Workers are the main drivers of competitive advantage, as a result of which HRM has a rather high strategic status (Jimoh & Danlami 2011). HRM handles issues that relate to performance management, compensation, safety, wellness, organisation development, training and development and motivation (Badea 2013). Training and Development (T&D) and Reward Management are some of the areas through which this is done (McDowall & Saunders 2010). Globalization has additionally eased communications and mobility across nations, increasing international business and making HRM applicable across borders (Jurecka 2013). While HRM is part of a greater strategy process within organizations, it has a major influence on individual employee performance. This paper discusses the contribution of HRM to organizational performance, with an emphasis on Training and Development and Rewards Management. The Strategic Significance of HRM Employees constitute the most basic element of any organization (Mulang 2015). Considering that HRM develops the procedures and policies that guide them, it can guarantee the creation of a productive, fair, and safe hence high performance workplace (Jimoh & Danlami 2011). The retention and even attraction of quality employees is a major challenge for HRM because of skill scarcity that has led to high employee turnovers all over (Terera & Ngirande 2014). From a ‘best fit’ perspective, there always has to be an alignment between HR and overall organizational strategies. When the HR strategies are able to be applied in various circumstances especially in IHRM, the outcome can easily meet both the employees and organization’s needs at that particular point (Stahl et al. 2012). Armstrong (2007) indicates that HRM is therefore the one to guide changes in the organization depending on the lessons learned over time so that the business can fit itself best into the market conditions. The global industrial marketplace has quickly evolved into a knowledge economy. According to Burma (2014), this requires proper utilization of human resources so as to maximize efficiency. HRM is therefore a major requirement in modern business, as it supplies the human effort for executing organizational tasks. HRM guides resource allocation for the sake of competitiveness. From a ‘best-practice’ perspective, HR-related activities are universal irrespective of where the business is located. According to Delaney & Huselid (1996), management commitment is essential, and businesses need to be flexible so as to counter the demands of a competitive environment. In this regard, HRM ensures that the firm has the appropriate employees who possess the right qualifications and skills and are in the right numbers to cope with both future and current needs, hence workforce planning where aspects such as absenteeism, turnover and productivity are evaluated. To Burma (2014), management usually tries to ensure a more effective and efficient use of resources, with the general strategic objective of being able to get maximum impact from the organisation’s activities while avoiding waste. Ireland et al. (2012) recommend that the organization must identify the people required, how they will be availed and the best ways of managing them, hence measures for tracking organizational progress through either financial or non-financial Key Performance Indicators (KPIs). HRM-led performance is measurable. According to Armstrong (2012), measurements of efficiency help to provide a benchmark for comparison with others. Modern organizations have to align their goals with those of HRM strategy so that management objectives reflect the people policies that are pursued hence it must be integrated into overall corporate strategy so as to produce optimal Return on Investment (ROI). Briscoe et al (2012) explain that failure to design HRM appropriately can result in losses in performance because the firm will not be able to optimize its employees. According to Mulang (2015), financial indicators enable comparison of different types of businesses, in this case profitability. Non-financial Performance Indicators are especially useful in HRM because employees are increasingly being considered by companies as being assets rather than costs. HRM uses non-financial motivators to supervise employees, hence the usefulness of metrics such as competence surveys, sick days and absenteeism and staff turnover. Badea (2013) explains that IHRM especially requires additional cultural sensitivity. The Role of Training and Development Human beings and their skills are the most significant input in organizational performance (Cania 2014). Training is an effort aimed at the improvement or addition of skills or competencies so as to enhance their productivity or performance (McDowall & Saunders 2010). Within T&D, there is an effort to change the skills set, attitudes or knowledge possessed at the time, as a result of which there has to be a change in behavior (Jayasekara & Takahashi 2013). Training involves the acquisition essential skills that are needed for a particular job, and specific goals for this are determined by HRM (Delaney & Huselid 1996). The reason for training is to fill the gaps between knowledge and skills possessed by them presently and what the organization believes they should have, hence this inevitably results in an increase in employee performance standards. HRM pursues T&D so as to extract the best performance from employees (Armstrong 2007). The process is therefore likely to benefit both the organization and employers, because the employee ends up more productive and efficient after training. There are many performance benefits for the organization from T&D. Considering the competitiveness of practically every aspect of business, training enables the effective functioning of work processes while boosting the quality of life at work and organizational development as a whole (Kulkarni 2013). It also leads to better risk management because it enables employees to learn multiple approaches to possible eventualities much faster (Mulang 2015). Training and development efforts further lead to improvement in the level of employee efficiency as it avails additional information on how best to work together, hence increasing efficiency (Stahl et al. 2012). T&D therefore provides additional skills through which employees get a chance to learn more about what they do, and this is likely to boost their performance, productivity and quality. Training and development raises the degree of job satisfaction among employees. According to Armstrong (2012), an employee might for instance end up more satisfied with the role assigned to him within the company, because he will be able to execute tasks better, and this usually results in a stronger feeling of belonging. When this happens, they feel more obligated to give back to the employer, and this is working harder. The additional skills that are gained also further enable them to work more efficiently, in the process increasing the company’s productivity. Ukandu & Ukpere (2013) explain that in addition, it leads to better use of resources, and with reduction in resource use, expenses are lowered. The number of accidents is also reduced and resources and machines end up more economically used hence better financial performance. There is additionally an improved ability to deal with change. According to Burma (2013), this is because it results in training needs while training and development on its part results in organizational and individual change. Technology especially drives the need because it changes the ways in which businesses compete. The need for such development necessitates training and development. According to Armstrong (2012), employees are motivated not only by financial reward, but also their self, holistic development, and this is a goal of effective HRM. The Case of Training and Development at McDonald’s UK McDonald’s UK believes that its delivery of quality services depends on the training of its managers and crew. Its strategy offers career opportunities that enable the maximization of employee potential, including a comprehensive program in which everyone’s skills are sharpened. There is also the provision for career progression within which even the lowest employee has a chance of rising to senior management positions by means of merit-based promotion. All employees are first trained on how to operate the different equipment and the company’s operational procedures. This is usually on-the-job training done at the work floor because it is believed that they will learn and internalize lessons better through practice. Every new employee starts training to gain basic skills and is later allowed to develop further until they attain maximum competence in every aspect of restaurant operations. Restaurant employees are supposed to go for classroom-based sessions on cleanliness, service and quality. There is also a comprehensive Management Development Curriculum to which every cadre of managers is eligible. This involves development modules, on-the-job training or seminars held at regional and national training centers. Departments within regional offices usually provide restaurant managers with seconding to work there, in the process offering experienced managers the chance to develop further on their skills and be able to have a different perspective of their branch operations with regard to overall company goals (Ireland et al. 2012). Organisational performance is significantly determined by employees. When training and management is not properly done for instance, there is the risk of it resulting in anger, grievance, mistrust or frustration among the employees, which by extension could lead to detrimental effects on performance at the organisational level (Gavrea et al. 2011). From their explanation, it is possible to conclude that if selection of people to attend training seems to be unfair, it might lead to feelings of injustice and therefore anger or apathy. Frustration could also arise if the training is one in which the employee is already well-versed, is not likely to contribute to his own idea of career development, or might end up not being valued. All these will diminish levels of morale, with the outcome of possible increased turnover and less motivation hence less commitment and productivity, which will negatively affect organizational performance. The Role of Reward Management Reward management is a highly significant practice in any organization. According to Pulparampil (2014), it involves motivation of employees by providing compensation packages for the work they have done. Pratheepkanth (2011) adds that it involves application of policies, strategies and processes aimed at ensuring that people’s contribution within the organization is properly recognized through non-financial and financial means. Pulparampil (2014) recommends that rewards must be equitable, adequate, and not entirely financial, including aspects such as job satisfaction and empowerment. Reward management is therefore important because it is one of the main ways through which the company will ensure that it keeps its employees loyal, happy and keen on rising further within the company’s ranks. Through the creation of a healthy working environment due to job satisfaction, there is the likelihood of cutting down expenses usually associated with hiring and training new recruits hence greater productivity and therefore organizational performance. Reward management contributes to an organizational culture within which employee teams and embrace continuous improvement. According to Terera & Ngirande (2013), the effect of this is that it will affect the expectations of the people as to how they will be rewarded, and this will impact on organizational performance. Going beyond financial aspects to non-financial aspects that result in both extrinsic and intrinsic motivation constitutes what they refer to as Total Rewards, where unlike in the typical approach, there is incorporation of the working environment and learning and development into employee benefits. It therefore includes aspects of company culture, with the intention of providing each employee with a voice in how the workplace works. Pratheepkanth (2011) explains that when an employee is intrinsically motivated, he becomes more committed to work as job tasks end up becoming more rewarding and he will be committed because he already knows he can get appropriate rewards to satisfy the needs of day to day life. From the discussion, HRM ensures that rewards to employees are not only desirable, but also achievable and available. For instance therefore, where performance-pay is opted for the criteria for determining it must be as transparent as possible and in case targets are beyond reach, there is the risk of employees not being committed to their achievement. The Case of Total Rewards at Nestle Nestle highly values the idea of total rewards. It not only provides employee benefits basing on performance, but also seeks to develop the trust and value associated with its brand-name, reward management also seeks to ensure the cultivation of the best possible relationships with employees and line managers, and enhancement of the work experiences and recognition of employees while offering the chance fro learning and growth. As part of its total rewards strategy therefore, there is the inclusion of personal growth, variable pay, fixed pay, work-life environment and individual growth and development as major elements. Each manager is supposed to propose what their employees should be provided with, based on their unique needs. The HRM function facilitates the gathering of such information, its communication and transparent implementation (Nestle 2012). A well-managed reward system will be able to channel motivation of employees towards the best outcomes (Cania 2014). It will help to attract staff, encourage them to keep performing highly, and provide the right decision-making and rule frameworks for allocation of compensation in exchange for employee input (Pratheepkanth 2011). The provision of rewards is a necessity, and according to Hameed et al. (2014), employees usually also seek intrinsic rewards for instance feelings of influence, achievement, meaningful growth, competence and significance. An employee will therefore judge how well they have been compensated basing on both categories of rewards. Any perception that they are not fairly given is also likely to create feelings of apathy towards the reward system, the effect will be negative on performance. Failure to have a proper reward management system will lead to the inability of the organization to have an accurate prediction of its future and present, both of which are necessary adaptation tools for operational and performance planning. According to Burma (2014), adhering to a wrong approach to rewards management can therefore negatively affect organizational performance, as non-financial motivators are increasingly getting a greater role. Overall therefore, Reward Management has a very significant role in ensuring the success of international business. According to Hameed et al. (2014), the development of a reward system which is fair will boost employee efficiency, because it will encourage ordinary workers to work much harder in pursuit of the standards that have been set hence become more productive and enhance organizational performance as a whole. Conclusion HRM plays an increasingly strategic role in ensuring sustained good performance of organizations. This is because of an increasing recognition of the role of employees in determining competitive advantage. Just like in HRM, IHR seeks to maximize the output of international workforces through application of both financial and non-financial motivating factors. Through Training and Development for instance, it becomes possible to improve employee efficiency and job satisfaction. It also results in increased organizational loyalty which cuts down turnover and its related expenses. When wrongly implemented, it can however lead to lower morale and therefore productivity. Proper reward management will on its part lead to creation of a self-improvement culture, satisfy intrinsic rewards and promote loyalty. However, if wrongly done, it can result in dissatisfaction, conflict and lack of adaptability. HRM activities in any organization therefore have a significant role in determining organizational performance. Reference List Armstrong, M. (2012) Armstrong's Handbook of Reward Management Practice: Improving Performance Through Reward. London: Kogan Page Armstrong, M. (2007) A Handbook of Employee Reward Management and Practice. London: Kogan Page Badea, M. (2013). Cultural Influences in Human Resources Management. Review of General Management, 17 (1), 179-187 Briscoe, D., Schuler, R., and Tarique, I. (2012) International Human Resource Management: Policies and Practices for Multinational Enterprises. London: Taylor & Francis Burma, Z. (2014) Human Resource Management and Its Importance for Today’s Organizations. 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