Management Dissertation

Question

The relationship between HR practices and organizational performance

Harvard, 22 pgs, 25 sources, essay, management, UK English

Description

  1. The essay should include an abstract, introduction chapter, and conclusion chapter
  2. Please write essay following the brief outline
  3. Reference as more as possible which use direct quotation should include a page number in the in-text citation

Abstract (about 200 word, 1 page)

Chapter 1 – Introduction (about 1000 word)

  1. Give out the background information of HRM, how it appear and grow up.
  2. Define HRM.
  3. Thesis statement
  4. Plan of the eassy.

Chapter 2  (about 1500 words)

This chapter should include an introduction, body paras, and a conclusion

  1. Defining strategic HRM — give out a definition of strategic HRM, a strategic HRM literature review. Explain why human resource strategy has more often been seen in terms of the implementation of organisational strategies.
  2. Outline the main practices of HR, explain how these practices could be efficiency to strategy HRM ,and will these practices with examples. ( it should make it fluency to next chapter )

Chapter 3  (about 2500 words)

This chapter should include an introduction, body paras, and a conclusion

  1. Definetion of Organisation performance; Organisational performance can significantly affected by systems, processes, structure and culture; Strategic human resource management practices should lead to stronger organisational performance, give out cases base on shows the link between strategic human resource management and organisational performance
  2. This part will linked HRM practices an organisational performance. Shows how important is each HRM practices mentioned on chapter 2 on organisational performance base on cases and compare between different areas( like Asia and Europe).

Chapter 4: Conclusion (about 800-1000 words)

  1. The review of this essay
  2. Restate the thesis statement

All in-text citation which used the direction quotation should include a page number, this is the require from my tutor.

Answer

The relationship between HR practices and organizational performance

Contents

Chapter 1: Introduction. 2

Background information on HRM: Emergence and evolution. 2

Chapter 2: strategic HRM.. 6

Introduction. 6

Strategic HRM literature review.. 6

Main practices of HR: participative human resource management, employee evaluation, and performance incentives. 9

Conclusion. 10

Chapter 3: Relationship between HR practices and organizational performance. 11

Introduction. 11

Impact of strategic HRM on organizational performance. 12

Participative HR management and organizational performance. 15

Employee evaluation and organizational performance. 17

Performance incentives and organizational performance. 19

Conclusion. 20

Chapter 4: Conclusion. 20

References. 23

 

Chapter 1: Introduction

Background information on HRM: Emergence and evolution

The concept of Human Resource Management (HRM) has changed many times in terms of the names used in the course of history. In most cases, this change of names has been a reflection of changes in areas of emphasis in the practice of HRM. The change of name was also occasioned by changes in the socio-economic activities that people were engaging in throughout history. During the early nineteenth century, the term ‘industrial relations’ was used to refer to HRM. During this time, laws were established for providing guidelines during the recruitment and selection processes. For example, the Factories Act 1833 stated that only male persons could be employed as factory inspectors in the US. Towards the end of the century, another law was enacted with the aim of regulating the number of hours women and children could engage in industrial work.

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Towards the end of the nineteenth century, the notion of industrial welfare also emerged. Factory workers started participating in trade union conferences. This marked the start of the era of collective bargaining. By the start of the twentieth century, workers had formed their own association. Later on, the association advocated for the use of the concept of ‘personnel and development’ instead of traditional notion of ‘industrial relations’.

The concept of ‘industrial relations’ was replaced by that of ‘personnel development’ during the World War I. In this new form of HRM, focus was on recruitment and selection. This emphasis was a reflection of the issues that many employers regarding as being the most critical during the process of hiring employees. The new concepts of recruitment and selection were popularized by the US government, which was keen to ensure that the most qualified people were selected to undertake various initiatives. These concepts continue to maintain relevance even in the twenty first century workplace. At the same time, the government made it compulsory for HR managers of explosive and munitions factories to hire welfare workers.

The concept of recruitment and selection was particularly mainstreamed within the armed forces. During this process, focus was not just on the abilities of individuals but also their intelligence quotient (IQ). Today, IQ remains a major concept during the recruitment process (Heneman, 2010). In many large firms, psychometric tests (for determining the IQ of a job candidate) constitute an integral part of the recruitment process, particularly in online environments (Heneman, 2010). Other human factors were also put into consideration during the selection process. During the 1920s, selection tests were established through tremendous support by psychologists, who conducted numerous studies. At the same time, progress was made in identifying the best interviewing techniques as well as methods of training the workforce.

At the start of the World War II, employers started focusing not only on recruitment and selection but also training, safety, health, motivation, and wage policies (Youndt, 2012). For the first time, employers felt the need for the establishment of a personnel department. This department had to be staffed with professionally trained personnel management professionals. During the World War a lot of emphasis was on consultation between the workforce and management. As a result, the personnel department ended up assuming the responsibility for administration within the organization.

A lot of focus shifted on the safety and health needs of various specialists within the workplace. Moreover, specialists were tasked with the role of dealing with industrial relations. On the other hand, personnel managers became spokespersons of their organizations whenever negotiations were held with shop stewards and trade unions. The importance of industrial relations continued being asserted throughout the 1970s (Marchington, 2000). At the same time, there was an increase in employment legislation. In this case, it was the responsibility of the personnel function to provide specialist advice to managers to ensure that no employment laws were violated.

During the 1990s, issues of flexibility and diversity within HRM practice. This followed a trend where employers were keen to introduce flexible arrangements in terms of working hours, leading to an increase in temporary and part-time work. The concept of distance working was also introduced. In this era of diverse work patterns, it was impractical for HR professionals to rely on traditional recruitment practices.

In the twenty first century, the internet has revolutionized the workplace. The internet has led to the emergence of e-commerce. E-commerce has led to the loss of many ‘traditional’ jobs while creating new employment opportunities. E-commerce also makes it possible for people employed certain jobs to carry out their workplace tasks from home. In this new era, organizations continue to face new challenges arising from these developments. For example, the role of HR managers has undoubtedly changed.

Information technology is largely responsible for far-reaching changes in the HR function. HR managers have been forced to embrace e-recruitment, online short-listing of job applicants, introduction of online training programs, and the launch of electronic payroll systems. Moreover, HR departments face the need to keep employment data and undertake pre-employment checks online.

HRM refers to the various policies and practices of carrying out all ‘people’ aspects of the position of management, including recruitment, selection, training and development, rewarding, and appraisal. In HRM, processes of planning, organizing, and directing human resources are carried out in such a way that individual, social, and organizational objectives are achieved. Through HRM, the labor force is utilized in such a way that the objectives of the organization are accomplished in an economical and effective manner. HRM efforts are said to have been successful when the highest possible degree of service to personnel is achieved while at the same time leading to the achievement of the objectives of society and the organization. In this regard, efforts should always be made to ensure that the goals of individuals and groups are achieved.

The thesis of this paper is that human resource strategy has more often been seen in terms of the implementation of organizational  strategies simply because HR managers first and foremost seek to safeguard the interests of the organization. The HR function operates as a department within the organization, meaning that it is an integral part of the organizational fabric. In such a situation, HR professionals are willing to cater for the wellbeing of employees only to the extent that the objectives of the organization are going to be achieved.

This aim of this paper is to discuss the relationship between HR practices an organizational performance. To achieve this goal, two main issues are addressed in Chapter Two. The first issue is that of strategic HRM. In this context, a literature review on strategic HRM is presented. An explanation is also provided on reasons why HR strategy is normally seen in terms of the implementation of various organizational strategies. The second issue relates to the main practices of HR. In Chapter Three, the concept of organizational performance is defined. Focus is on the extent to which it is affected by organizational structure, processes, systems, and culture. The idea that strategic HRM leads to stronger organizational performance is also reviewed. In this review, a comparison between HRM practices in Asia and Europe is presented.

 

 

 

Chapter 2: strategic HRM

Introduction

Strategic HRM is the pattern of carefully human resource activities and deployments undertaken with the intention of enabling the firm to achieve all its goals. This implies that there are three core components of strategic HRM. First, focus is on the human resources of the firm. This is the primary resource of the firm, and efforts are normally made to leverage it as one of the most critical sources of competitive advantage. The second component encompasses various HR policies, programs, and practices through which efforts are made to achieve competitive advantage. The third component encompasses both plans and patterns through which processes and goals of strategy are achieved. This chapter provides a literature review on strategic HRM. The chapter also discusses the importance of HR practices and why HR strategy is normally seen in terms of the implementation of various organizational strategies.

Strategic HRM literature review

In recent years, literature on strategic HRM (SHRM) has focused a great deal on both theoretical and practical perspectives. Various theoretical models have been conceptualized in efforts to highlight the various ways in which SHRM contributes to the bottom line of the organization. Different theoretical perspectives focus on different areas of organizational operations.

The universalistic approach is one of the perspectives developed with the aim of creating a better understanding of Strategic HRM. The universalistic approach encompasses the process through which traditional HR practices are transformed into specific ‘correct’ HR policies and procedures. The practices involved in this regard include selective hiring practices, employment security, decentralization of decision-making, extensive training, and high pay levels. In this way, strategic HRM efforts are viewed in terms of organizational strategies.

The strategic fit approach also focuses on ensuring that HR practices are matched with the overall business strategy of the firm (Heneman, 2010). External fit is said to have been achieved when HR practices are aligned with the external environment. This approach is in stark contrast with the conception in which SHRM is viewed as an internal service provider. In this perspective, the role of HR professionals is to provide human resource services to the business organization. In this undertaking, these professionals always ensure that the operations of the organizations are conducted in such a way that customers in all business units are satisfied.

SHRM may also be understood within the realm of the ‘configurational’ approach. The impression created in this regard is that HR practices may be configured in different ways depending on the tasks that require to be performed. When different strategies are put in place with the aim of achieving these tasks, overall improvement in business performance is achieved. In this regard, the underlying objective is normally to increase the competitive advantage of the business. Scholars who support the configurational approach argue that success in terms of competitive advantage depends on a set of HR practices rather than on a single HR program (Heneman, 2010).

In virtually all organizations, one of the realities of industrial relations entails the tendency to view strategic HRM in terms of the implementation of organizational strategies. In all the essential elements of strategic HRM, the underlying aim is to ensure that various organizational strategies are implemented successfully. For instance, one of the elements entails internal transformation of HR structure. During this transformation, a strategic HRM philosophy is created. In this undertaking, the transformation of HR staff takes priority.

In the traditional understanding of HR practice, significant differences are highlighted regarding the skills possessed by various HR staff members. However, in the context of strategic HRM, concerted efforts are normally made to ensure that all HR professionals make significant contributions to the process of change management. A global perspective is adopted in efforts of team building and strategic planning. In today’s environment of stiff global competition, most organizations are keen to introduce a new strategic view with regard to the management of human resources.

Whenever efforts are made to transform the organizational structure, it is common for a lot of focus to be on strategic HRM. Within this perspective, many organizational leaders regard SHRM as an integral function in efforts to achieve various organizational objectives. This is primarily because of the critical role that HR managers play in the implementation of various strategies of the organization. This explains why the nature of the organization’s business greatly influences the structure of the HR function. In other words, the decision on whether to decentralize or to centralize various HR functions depends on the implementation process as far as organization strategies are concerned.

Strategic HRM also plays a critical role in ensuring that administrative efficiency is enhanced. They play this role by actively participating in the process of ensuring that all services are shared in an effective manner. Incidentally, this active participation is an integral part of the process through which various organizational strategies are implemented. This means that the very nature of the strategic HRM function makes it indispensable in the process of implementing various within the organization.

In strategic HRM, one of the main objectives involves the improvement of administrative efficiency. In this undertaking, focus is on determining how current processes can be improved. HR professionals also set out to identify gaps between the way systems are functioning and the way they ought to function. The very act of filling these gaps acts as an indicator of the significant role of strategic HRM in implementing organizational strategies. By filling in these gaps, strategic HRM creates value to the firm rather than to employees and other stakeholders.

Main practices of HR: participative human resource management, employee evaluation, and performance incentives

The main HR practices discussed in this part include participative human resource management, employee evaluation, and performance incentives. In research on the private sector, the link between various HR practices and performance within the organization has been demonstrated. Kim (2002) points outs that through the HR practice of participative human resource management, efficiency is achieved in the organization. This creates the suggestion that the HR system tends to have great strategic potential with regard to efforts to drive organizational effectiveness. Through various principles of participative human resource management, efforts are made to identify and choose from among various HR actions in pursuit of the strategic objectives of the organization (Kim, 2002).

The practice of employee evaluation also contributes significantly to the success of strategic HRM (Mabey, 1995). To bring efficiency to strategic HRM, the efforts made must go beyond common focus on cost reduction, transaction efficiency, and improvement of the human resource process. In this regard, there is a need for employee evaluation efforts to be made to ensure that each person is contributing to organizational performance in the right way. In some organizations, a large workforce translates into high labor costs.

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When a large percentage of total costs fall into the category of labor costs, efforts to improve organizational performance are normally directed at the HR system. At this point, a lot of emphasis is normally on the HR practice of employee evaluation. This creates a better understanding of the entire HR system. The process of employee evaluation cuts across all HR processes including recruitment, selection, employee training and development, remuneration, appraisal, and promotion. In many cases, focus is on the ways in which the system drives employee performance competences. These employee performance competencies create value, thereby improving organizational performance.

Regarding performance incentives, it is imperative for employees to be motivated for them to carry out their duties with a greater sense of commitment. For a HR management system to drive performance, it should first provide the necessary motivation to employees. Many scholars render support to the link between various performance incentives, HR practices, and organizational effectiveness (Heneman, 2010; Paul & Anantharaman, 2003; Kim, 2002; Lee, 1996; Delery & Doty, 1996; Bae, 2000; Katou, 2006; Stavrou, 2010). In this way, the strategic potential of HR practices is demonstrated.

For this reason, organizations must establish and implement HR practices that explicitly focus on the performance incentives for all employees. In this undertaking, the ultimate objective of strategic HR activities is to establish HR practices for not only acquiring and developing employees but also motivating them. For example, an organization may decide to give out some form of compensation such as bonuses for a job well done by employees. This may motivate employees to work harder towards the achievement of organizational goals. Moreover, the incentives may help reduce the attrition rate at the organization.

The painstaking process of aligning the HR system with performance management and professional development is essential if organizational objectives are to be achieved. If the process is undertaken in the right way, the organization gets a good idea of how efforts towards practice improvement can be undertaken. For these objectives to be achieved, the workforce should be supplied with the right incentives.

Conclusion

In summary, this chapter has demonstrated that strategic HRM is often seen in terms of the implementation of organizational strategies. The HR practices discussed include participative human resource management, employee evaluation, and performance incentives. These practices, if properly implemented, bring efficiency to strategic HRM. The very nature of the strategic HRM function makes it indispensable in the process of implementing various policies within the organization. Moreover, when various strategic gaps are identified and addressed, strategic HRM creates value to the firm, thereby contributing to the achievement of organizational strategies. For these gaps to be identified, a lot of focus in strategic HRM should be on participative HR management, employee evaluation, and performance incentives.

 

Chapter 3: Relationship between HR practices and organizational performance

Introduction

Organizational performance is defined as the practice of undertaking recurring activities with the aim of establishing organizational goals, monitoring progress towards these goals, and making adjustments to ensure that these goals are achieved more effectively and efficiently. Guest (1997) states that in this practice, actual output of an organization is measured against the intended outputs. These outputs take the form of goals and objectives. In corporate organization, focus is normally on the analysis of three primary outcomes; namely market performance, financial performance, and shareholder value performance (Paul & Anantharaman, 2003).

This chapter provides an overview of the concept of organizational performance. It discusses the various ways in which organizational performance is affected by processes, systems, culture, and structure. The relationship between strategic human resource management and organizational performance is also examined. Focus is on determining how strategic HRM leads to organizational performance. A case study is presented with the aim of showing the link between strategic human resource management and organizational performance. In this case study, a comparison is made between Asia and Europe in the process of linking the three HRM practices mentioned in Chapter Two (participative management, employee evaluation, and performance incentives) with organizational performance.

Impact of strategic HRM on organizational performance

In recent time, researchers have devoted a lot of research on investigating the impact of strategic HRM and firm performance (Wright & Gardner, 2005). One of the reasons for the emergence of this trend was the constant worry among HR managers that they were unable to prove their contribution to the business organization. Many HR leaders express doubts regarding their contribution to value addition in quantifiable terms. In many cases, these doubts were reinforced by criticisms that HRM ads no value to business organizations. In response, many researchers and HR practitioners set out to carry out research aimed at demonstrating that HR practices lead to higher organizational performance. Some of the main areas of research include turnover, firm market value, and accounting profits.

Consequently, research evidence has shown that HRM impacts positively on different measures of organizational performance (Macduffie, 1995; Collins, 2003; Wright, 2003). According to Macduffie (1995), HR practices lead to improvement in quality and in productivity in auto assembly plants in different parts of the world. In the banking sector, there is a relationship between various practices of HR and accounting profits (Delery & Doty, 1996). In the manufacturing sector, proper combinations of HR practices have been observed to bring about positive operational performance indicators (Youndt and Snell, 1996).

The indication is that HR impacts positively on organizational performance. However, some concerns have been raised concerning the lack of methodological rigor in many studies. This criticism arises from the fact that it is important for clarity to be established as far as the existence of a causal relationship is concerned. Not many research studies have been carried out to determine the existence of such a causal relationship. Such studies would require the use of rigorous designs for testing various hypotheses. The objective would be to determine whether the use of HRM systems is actually responsible for increase in higher organizational performance.

According to Becker (1996), the decisions made in human resource management tend to have a unique impact on organizational performance. It is imperative for this impact to be analyze in detail, particularly in today’s changing economic environment, characterized by deregulation of markets, globalization, market competition, and changing demands from investors and customers (Becker, 1996).

For contemporary organizations to compete, they are compelled to improve their performance on a continuous basis by innovative products, reducing costs, as well as improving quality and productivity. In this undertaking, human resource decisions play a critical role in impacting upon the process of creating competitive advantage as well as ensuring sustained organizational performance.

Becker (1996) emphasizes on the difficulties that researchers face in efforts to investigate the impact of strategic HRM on organizational performance. One of these difficulties arises because of the small volume of literature on the subject. This creates a situation where some questions remain unanswered. For example, consensus is yet to be realized regarding the element of causality. Many researchers find it difficult to authoritatively attribute specific aspects of organizational performance to strategic HRM.

In simple terms, strategic HRM influences organizational performance by contributing to revenue growth and improvement in efficiency. Unfortunately, there is a tendency for human resources to be viewed both as a business function and as labor. Traditionally, organizations have been making efforts to minimize workforce costs by minimizing employment in the workplace. By viewing HR as a cost, managers are at risk of failing to appreciate its full potential. They are also likely to miss out on the noble opportunity of appreciating the potential for the labor force to act as a source of numerous efficiency gains. Similarly, this way of thinking may create a scenario in which HR decisions are not regarded as opportunities for value creation.

Today, labor costs constitute the largest operating cost for many organizations. Most organizations that intend to reduce costs focus first and foremost on undertaking reductions in employment. They do this as part of the process of restructuring operations with the aim of improving organizational performance. Questions linger over whether such decisions simply lead to the reduction of cost or whether they really create value.

From an empirical perspective, researchers face the challenge of distinguishing between those staff reductions whose aim is purely to cut costs and those that are supposed to create value through a reduction in the number of employees to ensure that the new structures are in line with the particular strategies of the firm. In most cases, the decisions by companies to reduce the number of employees can be interpreted from both perspectives. This is particularly the case in contexts where such measures trigger positive reactions in the stock market.

In recent times, a lot of interest is on strategic HRM as a lever that triggers economically significant effects on the bottom line of the firm. However, even from this perspective, there is a tendency for researchers to focus a lot on aspects of value creation. The suggestion is that strategic HRM has a direct impact on the implementation of various strategic and operating objectives of organizations. This new area of interest has significantly extended the frontiers of human resource research by extending its narrow traditional boundaries. In this strategic approach that emphasizes on value creation, a lot of research borrows heavily from economics, finance, and psychology. In other words, an interdisciplinary approach is normally adopted.

An underlying assumption in the value creation approach is that strategic HRM leads to stronger organizational performance. This means that it has a positive impact on various systems, processes, structures, and cultural frameworks within the organization. One way of examining this positive impact is to look at the impact of different HR decisions on organizational performance outcomes. In this regard, focus should be on those outcomes that are of relevance and clear meaning to managers, including productivity, stock performance, quality, profits, and organizational survival. At this point it may be important for focus to be on the impact of various HR practices. For purposes of this study, the HR practices under analysis include participative management, employee evaluation, and performance incentives.

Participative HR management and organizational performance

HR researchers and practitioners agree that participative HR management contributes positively to organizational performance. HR managers who adopt a participative approach enhance job satisfaction with the workplace, thereby reducing employee turnover (Kim, 2010). In the HR departments of many public agencies, participative management is one of the measures being undertaken with the aim of enhancing government accountability and overall performance (Kim, 2010).

By adopting participative management, those who participate in public management are simply responding to the urgent need to implement the most efficient human capital strategies with the aim of enhancing organizational performance (Jacobs & Washington, 2003). According to Wright (1998), many crucial issues that can be addressed appropriately in an environment of participative HR management relate to individual productivity and organizational performance. For example, when issues of absenteeism and retention are addressed, more opportunities for stronger organizational performance are created.

Lee (1996) introduces his research paper on participative HRM with the assertion that empirical research on strategic HRM is still at its stage of infancy. According to Lee (1996), it is imperative for researchers to undertake more empirical studies on the impact of participative HRM on organizational performance using data from various manufacturing firms. The findings derived in this way would go a long way in contributing to the debate on participative HRM. For example, in a case of manufacturing firms from Korea, Lee’s (1996) study showed significant differences in the effect of participative HRM on firm performance. In this study, focus was on competitive strategy types within the Korean manufacturing firms (Lee, 1996).

The concept of participative HRM is increasingly being used not just in the Asian context but also across Europe (Stavrou, 2010; Ogbonna & Harris, 2000; Kaufman, 2001). In Europe, focus is also on highlighting the various ways in which participative management leads to stronger organizational performance (Stavrou, 2010). Stravrou (2010) uses the business systems theory to explain the positive effects of participative management as a HR practice. Stavrou (2010) uses the concept of competitive advantage to analyze the impact of HRM on organizational performance in Europe. This is similar to the notion of competitive strategy types that Lee (1996) uses in his study of Korean manufacturing firms. In both European and Asian contexts, there is consensus that the participative  leads to stronger organizational performance.

Employee evaluation and organizational performance

Other than  participative HR management, the other HR practice under analysis in this chapter is employee evaluation. In this HR practice focus is on comparison between practices in Asia (Korea) and in Europe. In Korea, employee evaluation is one of the mainstream HR practices for both large and medium-sized firms. In these firms, HRM is valued because of its contribution in strengthening organizational performance.

According to Bae (2000), employee evaluation impacts positively on business organizations in Korea primarily by strengthening organizational performance. Bae (2000) highlights the findings of a study in which 138 Korean firms were examined for adhering to the HR practice of employee evaluation. Not only did these companies benefit from the element of competitive advantage, they also derived benefits through improved organizational performance. This performance was evident through growth in market share, increase in profitability, and improvement in the quality of products as well as level of productivity.

Some of the factors influencing high involvement in the HR practice of employee evaluation in Korea include the Asia culture, market forces, and the need to make improvements on the existing HRM strategy (Bae, 2000; Wright & McMahan, 1992). This undertaking also contributed to a trend in which employees increasingly acknowledged the fact that they were crucial sources of competitive advantages for their companies. Moreover, Korean companies that implement employee evaluation programs tend to record better organizational performance than those that do not.

In the Korean corporate context, companies that make use of employee evaluation also record a high level of employee participation. Employee evaluation efforts also influence the nature of training programs in the workplace. For example, the type of training provided varies from limited training to extensive training depending on the needs of a specific employee. The best way to identify these needs is through employee evaluation.

In Europe, employee evaluation initiatives have become a widely accepted HR practice, particularly in the post-World War II workplace (Cunha, 2012). Just like in Korea, market forces have greatly influenced the introduction of employee evaluation programs, with the underlying aim being to derive benefits to both the organization and the employee. The need to create job satisfaction among employee is based on the assumption that highly skilled who are satisfied with their jobs are less likely to move away from their present jobs in search of better employment opportunities (Wright & McMahan, 1992).

Employee evaluation is viewed as a strategic HRM undertaking of ensuring that the current workforce continues to contribute to the realizations of the objectives of the organization (Cunha, 2012). According to Cunha (2012) employee evaluation in most European companies is considered an integral part of a grand strategic management approach aimed at increasing industry attractiveness and competitive intensity.

In both Korea and European countries, employee evaluation influences the amount of training offered by various companies in the context of strategic HRM. The evaluation process enables HR managers to understand the specific training needs of various employees. In this way, they are able to adjust the level and nature of training with the aim of strengthening organizational performance.

The implementation of evaluation programs paves way for the assessment of the effectiveness of performance pay schemes. In some companies, particularly in Europe, performance pay schemes constitute an integral component of strategic HRM. Sometimes, employees may express negative perceptions towards equity in distribution of rewards. Through employee evaluation, organizations succeed in assessing the contribution of each employee to the overall organizational performance. In other words, performance appraisal systems bring the analysis of contributions to the grand strategic plan down to the level of the individual employee. The information obtained in this HR practice can be used to put in place mechanisms of bringing about improvement in organizational performance.

Performance incentives and organizational performance

The main reason for adopting the HR practice of performance incentives is to motivate employees. In both Asia and Europe, this HR practice is commonly used with the aim of promoting organizational performance. In India, pay systems form an integral component of HRM systems. For example, managers in the Indian hotel industry make use of pay systems and other incentives to promote organizational performance (Chand & Katou, 2007).

In some cases, the characteristics of hotels influence the strategic HRM systems adopted. This is perhaps because different hotels prioritize on different objectives as far as performance goals are concerned. In other words, the use of the same performance incentive in different types of hotels may bring about different levels of effectiveness in terms of performance. For HR professionals, this is an indication of the need for the proper alignment of performance incentives in order for positive impacts to be achieved with regard to organizational performance.

In Europe, it may be necessary to highlight the case of Greece, a European country. In Greece, the crucial role of HRM policies in organizational performance is well documented in literature (Katou, 2007; Katou, 2006).  Katou (2007) focused on a sample of 178 firms in the analysis of the universalistic model of human resource management. The analysis of strategic HRM showed strong support for the universalistic model. In this analysis, the aspects of performance incentives examined included benefits, promotion, safety, and health. In a different study investigating 178 manufacturing firms, a relationship was demonstrated between the HR systems of employee development, reward, and organizational performance (Katou, 2006).

Conclusion

In summary, this chapter has examined the meaning of organizational performance. It has also discussed the relationship between HR practices and organizational performance. The HR practices discussed include participative HR management, employee evaluation, and performance incentives. Analysis and review of literature has shown that all these HR practices impact positively on organizational performance. This view is reinforced through case studies focusing on corporate settings in Asia and Europe.

Chapter 4: Conclusion

In this chapter, focus is on a review of the essay. The essay’s thesis was that human resource strategy has more often been seen in terms of the implementation of organizational  strategies; this is simply because HR managers first and foremost seek to safeguard the interests of the organization. The HR function operates as a department within the organization, meaning that it is an integral part of the organizational fabric. In such a situation, HR professionals are willing to cater for the wellbeing of employees only to the extent that the objectives of the organization are going to be achieved.

The first chapter provided background information on HRM. Emphasis was on the emergence and evolution of the field of human resource management. This field has its origins in the early nineteenth century. Since, then, different terms have been used to refer to it, including industrial relations and personnel development. Most of the HR practices that are evident in today’s organizations were introduced in the post-World War II era. In the twenty first century, HRM has undergone a revolution, with the emergence of the internet and information technology heralding a new era of e-commerce. In this context, the practice of HRM has changed in response to the changing workplace where emphasis is on flexible working hours and the tendency by employees to multi-task. In HRM, one of the changes entails the introduction of e-recruitment systems.

Chapter Two has addressed the issue of strategic HRM. In strategic HRM literature review, one of the main issues relates to the impact of strategic HRM with regard to the implementation of organizational strategies. In this review, it is also evident that HR professionals  set out to identify gaps between the way systems are functioning and the way they ought to function. The very act of filling these gaps acts as an indicator of the significant role of strategic HRM in implementing organizational strategies. By filling in these gaps, strategic HRM creates value to the firm rather than to employees and other stakeholders.

Chapter Two also highlighted the main HR practices in today’s organizational contexts and how these practices bring about efficiency to strategic HRM. This chapter focused on three HR practices: participative human resource management, employee evaluation, and performance incentives. It is evident that participative human resource management has a great strategic potential  with regard to efforts to drive organizational effectiveness. Through various principles of participative human resource management, efforts can be made to identify and choose from among various HR actions in pursuit of strategic organizational objectives.

Employee evaluation is also a critical HR function particularly within the contemporary debate on strategic HRM. The practice of employee evaluation was found to contribute significantly to the success of strategic HRM. The analysis made in this essay shows that efforts made through employee evaluation must go beyond common focus on cost reduction, transaction efficiency, and improvement of the human resource process; efforts should be made to ensure that each person is contributing to organizational performance in the right way.

Regarding performance incentives, the essay demonstrated that employees must always be motivated for them to carry out their duties with a greater sense of commitment. For a HR management system to drive performance, it should first provide the necessary motivation to employees. Considerable research renders support to the link between various performance incentives, HR practices, and organizational effectiveness. The findings of the essay have shown that in this way, the strategic potential of HR practices is demonstrated. On this basis, it is correct to conclude that organizations must always endeavor to establish and implement HR practices that explicitly focus on the performance incentives for all employees.

In Chapter Three, focus was on defining the concept of organizational performance. The chapter also focuses on the relationship between strategic human resource management and organizational performance. The three aforementioned HR practices (participative management, employee evaluation, and performance incentives) were revisited with the aim of examining their effect on organizational strategies. All these three HR practices were found to have a positive impact on organizational performance. These findings confirm the position taken in the thesis of this essay.

The thesis of the paper was based on the idea that human resource strategy has often been seen in terms of the implementation of organizational  strategies. The examples of the relationship between HR practices and organization performance in Asia and Europe show that this is simply because HR managers first and foremost seek to safeguard the interests of the organization. This explains why the HR practices of participative human resource management, employee evaluation, and performance incentives contribute positively to organizational performance.

References

Bae, J. (2000). Organizational and HRM strategies in Korea: Impact on firm performance in an emerging economy. Academy of Management Journal. Vol. 43, No. 3, pp. 502-517.

Becker, B. (1996). The Impact of Human Resource Management on Organizational Performance: Progress and Prospects. Academy of Management Journal, Vol. 39, No. 4, pp.779-801.

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