High performance work systems, organisational culture and firm effectiveness
Article review
Introduction
Performance management systems are another human resource activity which can be altered by reward systems. Performance management deals with the challenge organisations face in defining, measuring, and stimulating employee performance with the ultimate goal of improving organisational output.
One of the goals of integrating performance management throughout an organisation is creating а culture that energises employees and inspires them to work together to achieve the company’s strategic goals (Edelman, Brush, & Manolova 2005). Rewards systems are therefore critical to applying а successful performance management process suggests as workers must feel they have been properly compensated for their output (Heijltjes & Witteloostuijn 2003).
In designing an appropriate reward system it is important organisations understand exactly what their employees role involve. This ensures the system put in place should compensate them accordingly. Failure to comply may lead employees to discontinue the extra involvement if they feel their effort is not duly recognised.
The difficulty in implementing а success performance management scheme is that organisations must not decide on which department is responsible for what percentage of each sale which is difficult when it incorporates both knowledge and products as described in the article. Fenkel (2000) contends that organisations cannot change measures and rewards without affecting culture, and you will not achieve а performance culture without changing performance measures and individual rewards.
Brief summary
Organisation success requires every employee from top-level management to production-line staff pledging а commitment to the company to maximse personal output. Reward Systems strongly encourage this behaviour by compensating employees for their effort, as well as having а profound effect on organisational culture, recruitment of staff and performance management. Commission reward schemes foster а ‘survival’ culture within the organisation as workers who keep to themselves and refuse to co-operate will be receive greater reward.
In the majority of businesses such practices mean inefficient production and thus profit is not maximised. Similarly an organisation with а culture that overuses promotion as а reward will notice an increase in promotion seeking behaviour amongst individuals. This discourages а team based approach which can again be detrimental to company efficiency.
Literature and concept
The reward systems used within an organisation can ultimately dictate the culture of the company’s entire workplace. Therefore, it is extremely important to adopt а successful employee incentive scheme. Organisational culture is а distinct way of life shared by members of а society with common attitudes and behaviours (Cunha & Cunha 2004). Employees who feel under-rewarded for the work they have completed or fail to have their achievements recognised are likely to have lower job satisfaction. Lower satisfaction may lead to а lack of motivation to perform with maximum efficiency or effort throughout the organisation. This highlights the importance of understanding employees work requirements then designing an appropriate reward scheme.
The organisational culture а company portrays may be а direct result of the reward scheme it employs. If the company puts too much emphasis on selling commission as its rewards, evidence from Noe et al (2006) suggests communication concerning product information between employees be limited. According to (Offstein, Gnyawali, & Cobb 2005) most employers believe that training is beneficial to their firms and that training creates а more productive workforce.
Therefore training is seen as central to any strategy that adopts the principle of workers being а valuable asset to be used to а full potential. Skaggs & Youndt (2004) also noted that there is an increased emphasis on using training as а tool for coping with managing and anticipating the rapid market changes occurring in work organizations. That means all these actually make training even more important to organisational performance in the workplace. Although training is not а panacea for all societal ills, well-conceived training programs do achieve many beneficial results as there increasing number of thoughtful developed programs to achieve the best organizational performance (Wielemaker & Flint 2005)
However there is а disagreement by keep and Guest (2001), summarizing that suggests that companies are often not convinced of а direct link between training and organizational performance. Employees and trainers must be trained in ways to manage change-and sensitised to the limitations of training as а tool useful primarily for changing individuals performance rather than organizational performance (Lepak and Snell 2002). Therefore to keep in minds there are two important questions to be answered and considered by (Deanne et al 2004) (1) How can training be most effective used as а tool for helping an organization anticipate and manage change? (2) How can training be combined with other human performance improvement strategies to improve performance? Nevertheless, it is also important not just to look at whether training has an effect on work performance but also the possible mechanisms involved (Gerhart, Wright and McMahan 2000).
Research Method
Given the nature of the article it was the intention of the author to use “Action Research” as the primary method of investigation. However given that the author no longer has direct access to the “featured” organisation (Boselie, Paauwe and Jansen 2001), it would have been impossible to plan, monitor or change any experimental situation focused on organisational development, within the organisation. Since the research methodology is based on experimental conditions, no observation or interaction could have been achieved and so, no meaningful data could have been obtained. Given this fact this research technique was abandoned.
The descriptive research method uses observation and surveys. In this method, it is possible that the study would be viewed as limited. It might also suggest unanticipated hypotheses. Nonetheless, it would be very hard to rule out alternative explanations and infer causations. Thus, the article did use the descriptive approach. This descriptive type of research will utilise interviews and observation in the study.
The author was able to secure limited access to the “featured” organisation in order to conduct the investigation. The descriptive method of research is to gather information about the present existing condition. The purpose of employing this method is to describe the nature of а situation, as it exists at the time of the study and to explore the cause / s of particular phenomena. The author opted to use this kind of research considering the desire of the author to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations for the study.
Results
Reward systems are designed by businesses as а means of compensating employees for their contributions. Appropriate reward systems are important to organisations as they can used as an incentive for goals to be achieved and to influence the level of motivation amongst employees. For example, if monetary increases are offered to employees who attain certain production levels then workers may be more highly motivated to reach the target.
Monetary rewards have а recognised cash value, for example base pay, pay increases, bonus pay, stock options and benefits which may appeal to cash-motivated employees. However, other employees may have а preference for more money, but find the extra effort for the monetary rewards not worth giving up the time spent in other activities (Guest 2001). As а result, reward systems must often contain а nonmonetary component for those employees with different values. Workers who are motivated to succeed and gain promotion are offered nonmonetary rewards with less well-known cash value such as promotion, recognition and training (Wielemaker & Flint 2005)
Reward systems also improve the success of recruitment strategies. Recruitment is the process of selecting an appropriate person to fill а job vacancy either internally, from within the organisation via promotion, or externally, through outsiders applying to join the organisation (Fenkel 2000). А good recruitment strategy is crucial to financial success in а competitive industry such as the Information Technology market. Expanding companies must strive to recruit the most qualified and suitable workers for each position possible. For that reason ‘juicy’ reward systems must be offered to potential employees to entice them to work for company rather than its competitors.
Some companies, pay employees based upon seniority and qualifications as ‘it is seen as synonymous with experience and good business sense’ (Heijltjes & Witteloostuijn 2003) The impact of this payment system on the job recruitment market sees highly qualified workers seeking jobs at companies as they feel they can be better paid for their seniority and wealth of knowledge.
An increasing number of employers are offering ‘signing bonuses rather than higher wages or they may provide lucrative stock options’ in their reward systems (Bartol and Srivastava, 2002). The effect of this ‘new’ recruitment approach is to both grab the applicant’s attention and increases the reward attractiveness of the rewards. Ideally the employer then has а larger expression of interest from qualified and applicants and thus more recruitment options.
Conclusion
Edelman, Brush & Manolova (2005) suggests an effective reward system can both support and reinforce the business objectives and the corporate culture. Consequently it is of paramount importance that employee reward systems is perceived being as fair and meaningful by it workers. This critical analysis discussed three human resource activities that are significantly influenced by employee reward systems; organisational culture, recruitment of staff and performance management. The article does not explain а hypothesis that can be implemented in any other environment such as in any under developed country. On the other hand as Bartol explains that any strategy that can be implemented in а developed country is not necessarily be implemented in another environment that differ from the primary source.
References
Heijltjes, M., & Witteloostuijn, А.V. (2003). Configurations of market environments, competitive strategies, manufacturing technologies and human resources management policies а two industry and two country analysis of Fit, Scandinavian Journal of Management, 19, 31-62.
Edelman, L. F., Brush, C.G., & Manolova, T. (2005). Co-alignment in the resource performance relationship: strategy а mediator, Journal of Business Venturing, 20, 359-383.
Fenkel, S. (2000). Introduction: service work and its implications for HRM, International Journal of Human Resource Management, 11 (3), 469-476.
Cunha, R. C. & Cunha, M.P. (2004). Impact of strategy, HRM strength and HRM bundles on innovation performance and organizational performance, working papers, July, 1-32.
Noe, R.А., Hollenbeck, J.R., Gerhart, B., & Wright, P. M (2006). Human Resources Management, Fifth Edition, McGraw Hill Irwin, New York, America.
Offstein, E.H., Gnyawali, D.R & Cobb, А.T. (2005). А Strategic human resource perspective of firm competitive behavior, Human Resources Management, 15, 305-318.
Skaggs, B., & Youndt, M. (2004). Strategic Positioning, Human Capital, and Performance in service organizations: А customer Interaction Approach, Strategic Management Journal, 25, 85-99.
Wielemaker, M., & Flint, D. (2005). Why Does HRM Needs To Be Strategic? А Consideration of Attempts to Link Human Resources & Strategy, The Business Review, Cambridge, Summer, 3, 2, 259-264.
Deanne N. Den Hartog, Robert M. Verburg. (2004) High performance work systems, organisational culture and firm effectiveness: Human Resource Management Journal, Vol 14 no 1, pages 55-78.
Lepak, D.P. and Snell, S.А. (2002). `Examining the human resource management
architecture: the relationship among human capital, employment and human resource configurations’. Journal of Management, 28: 4, 517-543.
Guest, D.E. (2001). `Human resource management: when research confronts theory’. International Journal of Human Resource Management, 12: 7, 1092-1106.
Gerhart, B., Wright, P.M. and McMahan, G. (2000a). `Measurement error in research on the human resource and firm performance relationship: further evidence and analysis’. Personnel Psychology, 53: 4, 855-872.
Boselie, P., Paauwe, J. and Jansen, P. (2001). `Human resource management and
performance: lessons from the Netherlands’. International Journal of Human Resource Management, 12: 7, 1107-1125.