Does the Bundling of Human Resource Practices Result in Better Performance - Essay Example

Does the bundling of human resource practices result in better performance? Name: Lecturer: Course: Date: Does the bundling of human resource practices result in better performance? Introduction “Bundling” describes the creation and implementation of a range of HR practices, with the view of interrelating them to allow them to be mutually supportive. In which case, the interconnect practices get to complement and reinforce each other to achieve an organisational objective (Gooderman & Parry 2008). It is the process of internal fit or horizontal integration, which may as well denote the process of deploying "complementarities". The logic behind bundling is to achieve coherence, which is among the implications of strategic human resource management. Organizations can integrate HRM practices to improve productivity (Becker & Huselid 2006). Indeed, there is a general acceptance of the concept that bundles of pertinent HMR practices are crucial for the realisation of synergetic effects. Hence, adoption of certain HRM practice becomes increasingly effective when adopted in combination with a set of other practices (Armstrong 2006). The practice of bundling HR strategies -- fit of horizontal integration -- is a significant dimension of the concept of strategic HRM. A survey of literature shows that organisations that adopt bundles of associated HR practices tend to experience higher levels of performance provided that they also achieve high levels of “fit” with the company's organisational strategy. Basing on this premise, this essay argues that the bundling of HRM practices can only result in improved performance provided that higher levels of fit within the organisation are also achieved. The paper will also examine the different models of fit in arguing out the case. Achieving organisational fit is at the core of many attempts to hypothesise strategic HRM. Internal fit denotes situations where an organisation develops several “interlinked and mutually enforcing HRM practices and policies (Richardson and Thomson, 1999). This signifies existence of a combination of “best practices” that fit comfortably in a way that one practice reinforces the other. Hence, synergy is achieved. Dyer and Reeves (1995) pursued a resource-based view or organisations with focus on achieving sustainable competitive advantage through efficient and effective utilisation of an organisation's resources (Pfeffer 2005). Based on this perspective, it is critical to argue that organisations with high performance are those that have acquired and deployed valuable and non-constitutable resources, such as the workforce. A related study by Wright et al. (2001) also established the significance of bundling human resource practice in creation of competitive advantage. According to Gooderman and Parry (2008), while human resources are potential sources of sustained competitive advantage, not all firms have the capability to develop them systematically through the use of HRM practices. Pfeffer (1995) also used a resource-based model to examine the impact of human resources practice of an organisation's performance. To this end, the significance of using a different HRM practices and policies being “mutually reinforcing” is undeniable. On the other hand, external fit describes when an organisation develops several HRM practices that are consistent with the business strategies, different from HRM strategies (Katou 2011). A key implication is that high performance will be attained when the right fit is realised, or when the corporate strategy and HRM policies match. A survey of literature shows that theorists have over the years reached a consensus that three models of fit exist, namely contingency, universalistic and configurational (Gooderman & Parry 2008; Delery 1998). Since external fit is a core aspect of contingency models, the contingency model relates to the theory of organisational theory in addition to individual HR practices that interrelate and interact with corporate strategies to ensure higher organisational performance. The contingency approach hypothesises that the effectiveness of an organisation’s combination of HRM policies and HRM practices depend on their consistency with other organisational strategies (Katou 2011). To this end, particular HRM practices and policies correlate with a range of generic business strategies. Several studies have established this link in rationalising their effectiveness in improving organisational performance. Pfeffer (2005) found that a set of HRP practices and policies when adopted with competitive products strategies promote organisational performance. Basing on these analyses, adopting contingency HRM strategy leads to optimised business performance. Since internal fit is a core aspect of universalistic models, a fundamental question is how to determine a set of synergistic HR practices that match to generate high business performance. Delery (1998) posited that such synergistic practices are reliant on additive relationships, where HR practices have overlapping and independent effects on the performance, in addition to interactive relationship, which refers to where the impact of HR practice relies on the degree of HR practices deployed (Delery 1998). Studies have examined mechanisms through which universalistic approaches impact organisational performance. Universalistic theory theories link ‘best practices’ and work on a fundamental assumption that there is a correlation between organisational performance and HRM practices. According to the theory, "best practices" can be generalised while organizational success can be measured effectively based on financial performance (MacDuffie 1995). Proponents of this theory have showed that combining a set of relevant HRM practices such as high wages, better incentives, information sharing, employee sense of ownership and skills development can lead to improved organisational performance (Pfeffer 1994; Boselie, Paauwe and Jansen 2001). Alcazar et al (2005) argued on the basis that using universalistic approaches in more than one HMR practices could indeed promote organisational performance, hence the term “High Performance Works Systems.” The perspective underscores the significance of using bundled HRM practices and is consistent with an earlier study by Guthrie (1999), who examined the application of high-involvement work practices and established their contribution to organisational competitiveness. These findings can be related to observations made by Guest et al. (2003) after examining 48 HRM practices in UK firms. Guest et al. (2003) reported that a greater use of HRM practices led to lower turnover rates and higher profits per worker. A related study by Delaney and Huselid (1996) investigated the use of a combination of seven HRM practices, such as higher incentives and training, and established that they led to increased organisational performance. Based on these perspectives, it can be argued that the Universalistic approach to HRM practices and performance creates a coherent rationale for the correlation between a combination of HRM practices and high organisational performance. Since external and internal fits are the core aspect of configurational model, the approach depicts the theory of organisational strategy and then the HRM practices that are in line with organisational strategy resulting to higher organisational performance. At the core of configurational perspective is the underlying assumption that the effect of HRM practices on organisational performance relies on the integration of effective set of HRM bundles (Gooderman & Parry 2008). To this end, it is critical to argue that optimising an organisation’s performance is contingent on the bundling of interconnected aspects of HRM practices consistently. Advocates of this approach suggest that the correlation between HRM practices and high organisational performance entails intricate interactions between a bundle or HRM practices and outcomes (Arthur 1994). Gooderman and Parry (2008) argued that these bundles generate significantly greater performance impacts compared to using individual HRM practices. As stated by Ichniowski et al. (1997), the outcomes of interaction among human resource management policies are vital determinants of organisational productivity. In which case, organisations realise higher performance and productivity by integrating bundles of complimentary practices instead to changing specific HRM practices. Despite the existence of organisation-specific variants of the configurational model, simply put, the configurational approach is based on the premise that HRM bundles can be equality effective when subjected to all conditions. This perspective finds back up in Caliskan (2010) findings that established a tendency of HRM practices and policies to mutually coexist and function together as a result creating high performance work systems. Similarly, Arthur (1994) established the potential impact of HRM bundles on organisational performance. In relating to configurational and universalistic model, Alcazar et al (2005) pointed out that universalistic bundles and configurational bundles should not be confused as one, since while the former is made of single practices that are combined in an additive manner, the latter is made up of holistic patterns of interconnected and synergistic practices. Conclusion Bundling of HRM practices can only result in improved performance provided that higher levels of fit within the organisation are also achieved. Internal fit denotes situations where an organisation develops several “interlinked and mutually enforcing HRM practices and policies. This signifies existence of a combination of “best practices” that fit comfortably in a way that one practice reinforces the other. A key implication is that high performance will be attained when the right fit is realised, or when the corporate strategy and HRM policies match. The contingency approach supports this thesis by arguing that an organisation’s combination of HRM policies and HRM practices depend on their consistency with other organisational strategies. In regards to high organisational performance, universalistic approach also argues that HRM practices and performance creates a coherent rationale for the correlation between a combination of HRM practices and high organisational performance. Configurational model shows that optimising an organisation’s performance is contingent on the bundling of interconnected aspects of HRM practices consistently. Reference List Alcázar, F, Fernández, P & Gardey, G 2005, “Researching on SHRM: An analysis of the debate over the role played by human resources in firm success,” Management Revue, vol. 16 no. 2, 213-241. Armstrong, M 2006, A Handbook of Human Resource Management Practice, Kogan Page Publishers, London Becker, B & Huselid, M 2006, "Strategic Human Resources Management: Where Do We Go From Here?" Journal of Management, Vol. 32 No. 6, p.898-925 Boselie, J, Paauwe, J & Jansen, P 2001, "Human resource management and performance: lessons from the Netherlands", International Journal of Human Resource Management, vol. 12, pp. 1107-1125. Caliskan, N 2010, "The Impact of Strategic Human Resource Management on Organizational Performance," Journal of Naval Science and Engineering, Vol. 6, No.2, pp. 100-116 Delery, J 1998, “Issues of Fit in Strategic Human Resource Management: Implications for research,” Human Resource Management Review, vol. 8, p.289–309. Delaney J & Huselid M 1996, “The Impact of Human Resource Management Practices on Perceptions of Organizational Performance,” Academy of Management Journal, vol. 39 no. 4, pp.949-969 Dyer, L & Reeves, T 1995, Human Resource Strategies and Firm Performance: What Do We Know and Where Do We Need to Go?, Paper prepared for presentation at the 10th World Congress of the International Industrial Relations Association Washington, DC, May 31 - June 4, 1995 Gooderman, P & Parry, E 2008, "The Impact of Bundles of Strategic Human Resource Management Practices on the Performance of European Firms," The International Journal of Human Resource Management, vol. 19 no. 1, p.2041-2056 Guest, D, Michie, J, Conway, N & Sheehan, M 2003, "Human Resource Management and Corporate Performance in the UK", British Journal of Industrial Relations, vol. 41, no. 2, pp. 291-314. Guthrie, J 1999, "High Involvement Work Practices, Turnover And Productivity: Evidence From New Zealand," Academy of Management Journal, pp.1-26 Ichniowski C, Shaw K, & Prennushi G, 1997, “The effects of human resource management practices on productivity: a study of steel finishing lines”, American Economic Review, vol. 87 no. 3, pp. 291-313. Katou, A. & Budhwar, P 2006, “Human Resource Management Systems on Organizational Performance: A test of mediating model in the Greek manufacturing context,” International Journal of Human Resource Management, vol. 17 no. 7, p.1223–1253. Katou, A 2011, "Test of a causal Human Resource Management-Performance Linkage Model: Evidence from the Greek manufacturing sector," Int. Journal of Business Science and Applied Management, vol. 6, no. 1, p.17-28 MacDuffie, J 1995, “Human resource bundles and manufacturing performance: organisational logic and flexible production systems in the world of auto industry," Industrial and Labour Relations Review vol. 48, p.197-221 Pfeffer, J 2005, "Producing sustainable competitive advantage through the effective management of people," Academy of Management Executive, Vol. 19, no. 4, p.95-197 Pfeffer, J 1995, "Producing sustainable competitive advantage through the effective management of people", Academy of Management Executive, vol. 9, no. 1, pp. 55-69 Richardson, R & Thompson, M 1999, The Impact of People Management Practices on Business Performance: A Literature Review, IPD, London Wright, P Dunford, B & Snell, S 2001, "Human resources and the resource based view of the firm," Journal of Management vol. 27, p.701–721 Read More