Leadership and Management for HR Professionals

Keith Porter, Paul Smith, Roger Fagg

• Publisher: Routledge
• Year: 2007
• ISBN:
  9781136388835
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

This is a new and completely revised edition of the successful text published in 2000 entitled Core Management. The book provides excellent coverage of the CIPD syllabus for three core areas of the CIPD syllabus. New end of chapter website links are included. The text is written in an easy-to-read style and each chapter is linked to other relevant parts of the book.

High performance organizations

DOI: 10.4324/9780080492810-1

Chapter objectives

In this chapter you will:

• Examine the links between people management and organizational performance
• Examine the meaning of the ‘psychological contract’ and the implications of changes to this contract
• Understand the importance of the concepts of employer brand, vision and culture in the context of people management
• Obtain an understanding of how the world of work has been undergoing a transformation involving flexible working
• Understand the concept of business ethics and its importance
• Relate these issues to the successful management of people.

Chapter introduction

How can we explain why some apparently similar organizations experience very different levels of business success? What makes for ‘excellent’, ‘world class’ or ‘high performance’ organizations? And to what extent can the lessons learned from such organizations be transposed to other different ones? What is the link between people management and organizational performance, and how can the HR function contribute to such performance? These issues will be explored in this chapter, along with a review of the concepts of flexible working and business ethics.

Case study

‘Best practice' at South West Financial

South West Financial (SWF) is a family-run SME (small-to-medium enterprise) in the financial services sector. It operates on traditional values, and can be viewed as being rather old fashioned and somewhat bureaucratic. The majority of its customers are mature; many are retired. SWF's personnel department concentrates on administrative matters and making sure that the correct policies and procedures are followed.

In recent years the firm has been struggling to cope with changes in the financial services industry, including deregulation and increased competition. After a meeting with the senior management team, the MD has concluded that one area that needs reviewing is that of people management in the organization. He would like to make it more modern and forward thinking. He has just returned from a management conference where one of the speakers was an American management guru who argued that the key to improved organizational performance and increased competitiveness was to implement a ‘best practice’ HR approach. He proposed a list of seven key HR practices, which included a sophisticated approach to recruitment and selection, involving the use of assessment centres, the creating of a ‘learning organization’, staff involvement, and self-managed teams. The MD was impressed and would like to implement the list of practices at SWF

Task:

As personnel manager at SWF, what advice would you give him?

Feedback

‘Best practice’ HRM specifies certain HR practices that purport to lead to improved organizational performance. Research provides some general support for this link, but raises many questions. These questions include exactly which practices should be included, plus how best to combine them. There are also question marks about how such practices work; indeed some commentators have argued that the direction of influence goes the other way and that it is successful high performance organizations that tend to implement best practice HR, and not vice versa.

The MD needs to think carefully about what type of HR practices would suit SWF, and how they can best be matched together to form an integrated set. Thought also needs to be given to how the practices will be implemented, and managers are likely to need training and development in their application.

1.1 People management and performance

Section objectives

In this section you will:

• Obtain an understanding of the concept of Human Resource Management (HRM) and its links to strategy
• Understand the ‘best practice’ and ‘bundles’ approaches applied to HR
• Examine and evaluate the links between people management and performance.

1.1.1 Introdoction

As the CIPD point out,¹ interest in the people/performance link has been generated in the context of a turbulent business environment (see Part 3 for a more detailed consideration of the external environment). Organizations face a context increasingly characterized by intensifying competition which is now global, demands to satisfy shareholders and customers, to deliver ‘best value’, to innovate and to capitalize on technological developments. As a consequence of such pressures, organizations have to operate more efficiently, flexibly and responsively. Chapter 7 covers customer relations and meeting customer needs in detail.

Although for a long time lip service has been paid to the adage that ‘people are our greatest resource’, practical steps need to be taken in order to move beyond the rhetoric of this. As the business environment has become increasingly competitive and complex, an understanding of the key contribution of people to organizational performance has become a critical factor for organizational success.

How can we identify high performance organizations? One issue is that of measurement. Traditional approaches have focused on financial and operational measures. Although these are important, there has been a growing realization that they are not sufficient in themselves. Short-term profits may not be the precursor to long-term success if, for example, such profits are accompanied by complaining customers and disgruntled employees. Wider measures such as the balanced scorecard have proved useful in this respect. Examples such as that of Kaplan and Norton² still include hard financial measures, but balance these with softer measures such as customer views and employee skills, knowledge and satisfaction, intellectual assets and organizational learning. Purcell et al.³ cite how Tesco has developed its own version of the balanced scorecard, taking the form of a ‘steering wheel’ with four quadrants – people, finance, customers and operations – against which every store's performance is measured.

Example

A perusal through the business press will result in the identification of case studies of organizations that could be designated as being ‘world class’ – organizations such as the Nationwide, First Direct, Prêt-a-Manger and Singapore Airlines. Public sector examples, such as Liverpool Council, can also be found. Organizations such as the Institute of Customer Service draw their membership from across the private and public sectors, aim to raise customer service levels and sponsor awards to this end. The Sunday Times produces annual lists of the ‘Best Companies to Work For’, with Nationwide winning their ‘10 Best Big Companies To Work for 2005’ category whilst W. L. Gore topped their top 100 list based on firms with more than 250 employees.

Of course care needs to be taken with such identifications (they only include companies who have entered) and subsequent interpretation – any lists or awards are based on particular criteria of what constitutes ‘best’. Consulting wider sources can reveal competing perspectives. For example, Asda, which was placed second in the Sunday Times ‘10 Best Big Companies to Work for 2005’, has been the subject of disquiet concerning the anti-union activities of their parent group Wal-Mart in the USA, and has itself been subject to a dispute with the GMB trade union over collective bargaining rights at one of its distribution centres here in the UK.⁴

Of course, what makes a company a high performing exemplar today may not make it successful tomorrow although, in general, excellent customer service and high commitment amongst staff are likely to be enduring characteristics of success. In addition, although we can learn a lot by looking at an exemplar organization, that does not mean that the organization's methods for achieving success can be transported wholesale to a different organization or sector. We should seek to identify good practice in general terms rather than best practice in specifics, and subject good practice to variation depending on the contingent factors faced.

1.1.2 Human resource management (HRM)

Whilst we can see possible antecedents to HRM in earlier theories, particularly those of the human relations school, the term itself came to prominence in the 1980s, originally in the USA⁵,⁶ and then in the UK.⁷,⁸ The reasons for its emergence at that particular time have been much debated, but include: economic pressures such as recession; the challenge of overseas competitors and the need to improve productivity, particularly in comparison with Japan; political influences on both sides of the Atlantic with the election of the Reagan and Thatcher governments; and a decline in the collective influence of trade unions. From such influences sprang the desire to reduce conflict in the employment relationship and create a unitarist scenario where employers and employees worked together towards the same goal – the success of the organization.

Interest in HRM in the UK developed in the late 1980s, amongst both academics and practitioners. Models of HRM were propounded and particular focus was given as to how the ‘new’ HRM differed from the ‘old’ personnel management. Although views differed, certain general themes could be discerned: HRM can be regarded as more strategic, more closely aligned with the needs of the business, less rule-bound and less bureaucratic, and having a greater focus on the key role of line managers. The importance of flexibility and organizational culture is also stressed. The strategic aspect is covered below, and both flexibility and culture later in the chapter.

David Guest (1989, 1997)⁹,¹⁰ developed a theoretical framework which proposes the view that a set of integrated HRM practices can achieve superior individual and organizational performance. The model has six components:

1. An HRM strategy
2. A set of HRM practices
3. A set of HRM outcomes
4. Behavioural outcomes
5. A number of performance outcomes
6. Financial outcomes.

The model is summarized diagrammatically in Table 1.1.

In the literature a distinction can be seen between ‘hard’ and ‘soft’ models of HRM.¹¹,¹² The ‘hard’ model – as with Fombrun et al.'s approach⁵ – stresses the links between business and HR strategies, and the crucial importance of a tight fit between the two.¹² The human resource is seen in the same light as any other resource, to be used as efficiently as possible by management. The focus here is on the quantifiable ...