Exploring Hrm Performance Linkages

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EXPLORING HRM PERFORMANCE LINKAGES

Submitted in partial fulfillment of the requirements of the course

Human Resource Management I

Instructor: Prof. Miguel Sarrion

Academic Associate: Ms. Ritika Gupta

Submitted on August 12, 2016 by

Pawan Kumar

Ishan Jain

Mudit Jain

Farkhanda Ansari

Avneesh Pal

Vaishali Singh

Group 2, Section C

EXECUTIVE SUMMARY

Over the last decade, several researchers have conducted various research studies to identify the linkages between performance and human resource management. It was identified that HRM has a strong positive effect on the performance of both the organization and the individual. As HRM evolved from a supportive role to becoming an integral part of organizational strategy, it holds the potential to improving performance and providing a competitive edge to an organization. In this report, we examined the effect of several HRM practices on the firm performance. This effect on performance was categorized as either financial, organizational or HR-related. We examined academic literature and also identified published real life examples that support the nature of the linkage.

Table of Contents

EXECUTIVE SUMMARY        

1. Introduction        

2. Performance: a concept with multiple dimensions        

3. HR practices and sales growth        

4. The influence of training on company’s performance        

5. Recruitment        

The process of Selection:        

6. Employee Benefits        

7. Appraisal: Linkages to the Organizational Performance        

8. Conclusion        

References:        

1. Introduction

Management of human resources focuses on modifying policies and people systems to streamline the organizational processes and improve employee and firm performance. Earlier HRM was considered as a mere supporting function to the line operations. However, empirical research conducted in the last decade on the value addition to performance by human resource management (HRM) demonstrates evidence that HRM does matter (Conway and Sheehan, 2003; Paauwe and Boselie 2005). We explore the nature of linkages between performance and HRM with the underlying assumption being that human resources are manageable and developmental (Wright et al., 1994). That is, appropriate HR practices (such as training and appraisals) can increase the value of human capital and also influence them in the desired direction. This leads to an increase in the performance of the firm or department by optimizing the use of human capital within the firm.

2. Performance: a concept with multiple dimensions

There are several methods of measuring the effect of HRM on performance outcomes of a firm (Dyer and Reeves (1995):

1. Financial outcomes (sales, market share, Tobin’s Q, ROI)
2. HR-related outcomes (employee satisfaction, attrition)
3. Organizational outcomes (quality, productivity)

While financial outcomes of HRM are viewed as perhaps the most dominant parameters to gauge the efficacy of an HRM practice, these “shareholder centric” outcomes can be too limited as they focus primarily on the bottom-line performance of the firm (Truss, 2001). Thus, financial parameters alone may not be representative of the true performance. To incorporate a more holistic view, it is necessary to consider performance from the perspective of relevant stakeholders (e.g. employees, customers). We examine how HRM practices can affect financial, organizational and HR- related outcomes of a firm.

3. HR practices and sales growth

To examine the linkage between HR practice and sales growth, Batt (Batt, 2000) conducted a study on a nationally representative sample of 354 customer service and sales establishments in the telecommunications industry. These establishments were stratified by size (10-99, 100- plus employees) and state location. Using OLS regression, it was demonstrated that sales growth is higher in establishments that emphasize high skills, employee participation in decision-making and in teams, and HR incentives such as high relative pay and employment security. After adjusting for market segments and size factors, it was shown that high involvement is associated with a 16.3 percentage point increase in sales.

4. The influence of training on company’s performance

Employees are one of the most important resource of an organization. In a changing environment employees need to be chiseled and trained from time to time. Training shapes the behavior and attitude of the employees according to the changing trends in the industry due to technology, political and environmental factors. It improves the competency of the employees and builds over and above the skills they already possess. Thus, organizations identify and determine the need of training, planning of the programs, its implementation and finally the evaluation. Proper and timely training saves the time as well as money of the organization. Training reduces equipment mishandling, prevents duplicity of work, lessens the customer complaints and overall improves the work output.

Several researchers have shown that training does have positive effects on productivity, measured as value added per worker (Black and Lynch 1996, Ballot, Fakhfakh and Taymaz 2001, Barrett and O’Connell 2001, Zwick 2006). On the other hand, researchers (Ahmad & Schroeder 2003, Garcia 2005) have studied the effect of training on sales and found that training led to an increase in sales, quality and customer satisfaction. Organizations have started realizing the significance of training. An example is ‘One Mahindra Learning’ program, started by Mahindra & Mahindra Ltd. ‘One Mahindra learning’ is a 70-20-10 model, wherein 70 percent emphasis is given on learning by doing, 20 percent on coaching and mentoring and 10 percent on formal training. “All this to better the performance and create a sustained competitive edge”, says Rajeev Dubey, President Group HR Mahindra and Mahindra Ltd. Motorola is the harbinger when it comes to providing training in the organizations. It gave utmost importance to training from its inception in 1928. The training experiments at Motorola became very successful and contributed to the company’s performance in 1980s. It was also the training which brought about perfection in the products of Motorola. This made other organizations follow suit. For the past four years the budget for learning and development is on the rise. According to a report prepared by Todd Tauber, vice president, Learning and Development Research, Bersin by Deloitte, in the US alone the total spending on employee training was $150 billion in 2013. With an average investment of $1200 per learner; which in itself has a 15% percent leap over 2013.  The organizations are realizing the importance of investing in training and development of the employees and thus investing significantly to achieve better performance.