HRM strategic approaches leads to improved organisational performance

Staffordshire University

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BA(Hons) Business Administration Level 3

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Management Of People In Organisations

Essay title: Critically assess whether HRM strategic approaches leads to improved organisational performance .

Date Submitted: Wednesday, 29th April 1997 --------------------------------------------------------------------------The term "human resourcing" is used here to describe a key set of principles th rough which the strategic possibilities of an organization's workforce and emplo yment structure are evaluated. The methodologies of human resourcing derive fro m two concerns: 1. The auditing of current human resources in relation to possible future produc t/service and labour market scenarios. 2. The promotion and maintenance of optimal human resource performance through t he management of work patterns and organization structures. While human resourcing encompasses what has traditionally been termed manpower p lanning, it also involves another dimension: that of managing motivation and act ivity in support of enhanced performance. Manpower planning The basic idea of manpower planning as developed in the 1960s was to manage the headcount of an organization in such a way as to achieve compatibility with pred icted trends in performance over time. The emphasis primarily was on the relati onship between numbers employed (in various capacities) and the rate of growth o r contraction of the organization. This approach rested on three sequential ste ps (Bennison 1984:4): 1. An estimation of the organization's future manpower needs in terms of numbers and skill composition.

this promise frequently seems to have been incomple tely realized. and foreign exchange rates cause problems in managing economies. this approach had the advantage of combining sophisticated mathematic al modeling with a range of potentially innovative policy options (i. within and out of the organization. human ass et accounting. In theory. which. The notion that it is possible to estimate future manpower needs.e. (Flamholtz and Lacey 1981:57. 3. and the ability of relevant labour markets to supply existing or future demands. step 3 above) in practice. following Benison s cartographic metaphor. (Bennison 1984:5) Such problems with traditional mathematical approaches to manpower planning led to moves away from forecasting and towards the auditing of organizational manpow er.2. which has also exerted an influence. more influential in recent years. This 'practical' approach. Human asset accounting and human resource audits The popularization of human asset accounting (or human resource accounting. According to the latter: Human resource accounting may be defined as the measurement and reporting of the cost and value of people as organizational resources. the techniques were well founded. wars. there is another quantitatively orientated approach. Demand is particularly susceptible to changes in the outside world. According to Pearson (1991 :18) the prioritization of statistical analysis also encouraged "an uncritical a cceptance of existing categories of manpower and career structures. in tur n. with the p recision necessary to match policies of supply. commodity prices . there was another more serious problem: the inability of this type of planning technique effectively to "connect" with real organizational performa nce. however. Yet it failed to make the impact i t should have done because it contained within it an immense practical difficult y. These external events are essentia lly unpredictable and so the ability to estimate the demand for an organization' s manpower is suspect. and the idea of a m anpower planning system seemed unassailable. g iving manpower planning the appearance of an esoteric activity accessible only t o those with a high level of quantitative knowledge. In addition. Although these latter techniques have contributed significantly to contemporary human resourcing. as i t is also known) is usually attributed to Likert (1967) although Flamholtz has b eet. An analysis of labour flows into. affect the growth rates of organizations. an exercise that can be undertaken with the assistance of techniques such as flow charts. encouragi ng conservatism and myopia when innovation and clear-sightedness were necessary (see also Maloch 1988). The identification of gaps between supply and demand and the development of p olicies to 'close' these. It involves accounting f or investment in people and their replacement costs as well economic values of p eople to an organization. As Bennison explains: The framework was logical. From the outset. histograms and pie charts. is conc erned not with planning detailed routes between destinations but with producing a 'map' of the organizational manpower 'configuration' and the general direction in which it is heading. simply becau se they provided instant fodder for equations and computer databases". rather than comple x mathematical functions. emphasis added) This concern reflects a long-standing debate within accountancy about the precis .. is quite fallacious. the mathematical dimension tended to dominate.

for inst ance.. Tyson and Fell (1986:93). as with mathematical manpower planning. rather than prescription and certain ty. Historically. there is a requirement to decide exactly how this is best expres sed. An example of this approach is provided by the West Midl ands and North-Western Regional Health Authorities' Human Resource Management Au dit. with no value (Dawson 1989:6).. Dawson (1990). for a useful overview see Gray and Mau nders 1987: 161-7. by means of the choice of distribution and whether there are seasonal varia tions.' But. A key part of this analysis is that it organi zes the numerical and cost dimensions of human resourcing decisions in a way. if the manager feels that some time elapses whilst a particular activi ty takes place. for which the manager has to provide input data for both time and costs. is analytical rather than prescriptive: it aims to encourage managers to develop their own ways of measuring performance against targets and objectives developed from the experience and needs of their own particular units. which are prompted by the use of the model. accounting conv entions have treated employees as a (variable) cost of operation. For example: The eight stages of the acquisition process [in Dowson's model] are broken down into 26 separate activities. In this respect althou gh what is now termed 'human resource auditing' borrows its title and rationale from accountancy. wh ich emphasizes contingency and probability. (Dawson 1988:36) . it draws attention to the significance of the 'establishment level' and the convictions which lead to the setting of its particular size. it also makes heavy use of the methodologies of the social and information sciences. suggest that it provides a major benefit by encouraging the perception of employees as a ssets: "The notion of "investing" in employees encourages a view that one is loo king for the profit to be gained from the investment and therefore the focus is on the development of people for a purpose. significantly. adapt and apply the v arious diagnostic instruments in ways which are best suited to their own circums tances. (IRS 1992c:7) A related but more sophisticated development has been the modeling of cost-based financial manpower decisions on computer spreadsheets. Although this relatively sophisticated tool failed to resolve satisfactorily either the practical problems of measurement or the dispute over accounting concepts. Although some of these inputs may be given the value zero . there has been a tendency for highl y technical accounting principles to give rise to concepts with a lower level of technical specification and more general applicability. T he underpinning rationale of this approach. Flamholtz's challenge to this 'accounting hegemony' suggested ways of measuring the value of an employee to the employing organization by mean s of the Stochastic Rewards Valuation Model (an accessible and brief account of which is provided by Dawson 1989). for example.e nature of employees as assets: can something that is not owned by the company be regarded as an asset? (Hermanson 1964. Moreover. also Giles and Robinson 1972). the general approach has attracted qualif ied support for its intentions. The confront ation and subsequent thinking through of these issues. this model also forces managers to engage in the prior process es of clarifying their own understanding of the ways in which employees are used and their value to the organization assessed. uses a computer simulation model based on principles of stylized stock con trol (Dawson 1988:33) to provide a form of scenario analysis whereby different i nputs and outputs can be compared. am potentially of considerable benefit. which develops measures of human resource outputs and effectiveness derived mostly from diagnostic questionnaires and financial and productivity ratios. Managers are encouraged to revise. Importantly. it still requires the manager to go through the process of considering each.

storing performance appraisal data. they can have remote access to the CPIS where they activate pre-written programs to generate the reports they need (Richards-Carpenter 1992:36). recruitment administration. it does seem that the growing sophistication of IT sys tems is also supporting a more innovative and creative dimension. However. a system can automatically drive the payroll. 'Where. the full potential of CPIS is held to lie with the de velopment of networked systems.000 people. Having already noted the potential danger of an over-reliance on data processing encouraging analytical c onservatism (Pemon 1991). Figure 1 Molecular CPIS structure (Source: IPM/AMS 1991) Here. Examples of the theoretical uses to which such a system.This use of computerized systems as a way of challenging managers to confront th e basis of their human resource thinking raises a number of issues about the rol e of information technology (IT) in this area. a role which has increased signif icantly over recent years. both the quantity and sophis tication of applications has increased. The 1991 survey of computer use in personnel (IPM/IMS 1991) revealed that some 9 6 per cent of respondent companies were using computerized personnel information systems (CPIS). abolishing the need for hard-copy time sheets and associated processes. the latter especially since the late 198 0s. including 53 per cent of those with fewer than 1. for example. Such a system provides a basis for a manpower costing system that can be interro gated by line managers on a 'need to know' basis. aimed not only at modeling specific processes but also at the development of new ways of conceptualizing basic human resourci ng assumptions. who posit a molecular human resourcing system as the next step in CP IS (see Figure 1). this may allow the remote input of overtime and absence data . Thus. This type of development has been projected into the future by Woodward and Winc hurch (1991). the nucleus of the system is composed of personnel records to which numero us other principal and subsidiary modules (in the form of specific software appl ications) are linked. Over this period. could be put are suggested by Woodward and Winchurch (1991:71) thus: Recruitment Production of detailed job/person profile Biodata analysis Psychometric testing Using data on current employees for comparison and profile building Job evaluation Production of printed interview guides Total analysis of all results to produce a shortlist Producing rejection letters automatically Cost analysis of the program and costs per individual . However. IT and human resourcing The role of computers in personnel has been the subject of increased interest an d scrutiny over the past decade. instead of sending large quantities of manpower reports through the post to line managers. the widespread adoption of computerized human resource 'systems' has focused more on the collection and processing of large amounts of informati on in a manner which provides 'pre-packaged' results. absence control and training administration. T hese systems were utilized to provide electronic office facilities. whereas Dawson's approach is very much in t he tradition of 'action research'. once operational.

). skills and person specifications. In these respects. Nevertheless. but also extending into organization design and career and succe ssion planning. therefore. allowing the devolution of human resource informatio n to line managers as well as its escalation to senior executives and strategies . not only defining jobs. it is significant that m any approaches to the use of CPIS give growing recognition to its applications i n the socio-cultural dimensions of organization (see Legge 1989 for a comprehens ive review) such as equal opportunities. a prospect that app ears especially propitious for the current concern to link human resourcing tech niques to the management of performance at both individual and organizational le vels. A prime example of this type of endeavour is the strategy ad opted by the computer company ICL and given voice in their company 'bible'. S imilarly. personal deve lopment. organization charting Projected costs Matching of competencies to projected job profile Team-role analysis. performance in terms of these g oals is usually a central concern. has developed a computerized biodata/psychometric assessment package which is used t o screen candidates and quickly provide hard copy reports (in less than two hour s) which can be used as the basis for personal interviews (Selby 1991:123ff.Budgeting Succession planning Appraisal results analysis Matching of personal details to the job requirements Training and development needs 'What if. for example. it being highly congruent with decentralized and/or fl at organization structures. (1991:73) put forward claims to h ave founds instances of this emergent role. appraisal and assessment. involving the identification and prioritization of options for m oving or replacing the holders of specified jobs. The implications of this type of system architecture within an HRM framework re potentially significant. although a study by Torrington et al. The . To the extent that success in this respect c an depend heavily on the effective deployment of human resources. there may be increasing opportunities for the inte gration of quantitative and qualitative human resource data. Securicor PLC. The logic of this type of information configuration places the human resource manager in the role of a facilitator or internal consultant. Salary management Payroll Salary modeling Absence Pension and benefit calculations Manpower planning costs. one key aspect of human resourcing is to make the linkage between goals and performance explic it and manageable. assisting other man agers with the accessing and use of information and (expert) systems relevant to particular operational personnel practices (Richards-Carpenter 1992: 61) However. PERFORMANCE MANAGEMENT SYSTEMS Given the goal-directed nature of organizations. the authors remained cautions about its rapid spread in the immediate future. and planning organization structures. Spencer (1990:331) gives details of a job analysis and evaluation pack age which serves as an expert system.

is a system. and to the motivation and development of the individual via the system. The result.. ? A performance appraisal mechanism. Perfor mance is the way forward . The four steps in the cycle are defined as follows: Step One. models of performance management systems generally pay con-side rable attention both to the organizational 'climate' which the system presuppose s. which works as a continuous cycle. (Cited in Williams 1991) The operational basis of this philosophy is a system of performance management i nvolving 'a logical sequence of four steps linked with the cornpany's business s trategies'. as part of the normal busin ess review process. Step Four. An organization capability review which. ? A clear process for establishing individual improvement progranunes.g. It is down to managers to make sure that these object ives and responsibilities provide maximum opportunities for the development of i ndividual talent and to operate the company's recognition and reward systems on their achievement. In short. performance plan provides the concrete details of what performance wil l be sough and what will need to be done (e. it takes a view which Is t which focuses merely upon the results' emphasis. training/support) to reach this . they suggest. a career development plan and a training plan. This results in the joint determination of a personal/job imp rovement plan. focuses on the total Organizational capability of each part of the organization to achieve the future business strategies. A formal appraisal centered on what was achieved against these prear ranged objectives. rewards. Thus. promotion and opportunitie s for career and job development depend absolutely on results delivered. Once committed in p rinciple. A per formance agreement is determined mutually between an individual and his /her man ager which provides the reference point for the more formal performance plan In many ways. (Neale 1991: 12) What can be seen from this example is the to performance places upon the management rces.ICL Way: ICL is an achievement company. ? Performance indicators and critical success factors. which this type of approach process as this relates to human resou broader and more encompassing then tha or 'ends' of a given task. The determination and setting of individual objectives which support t he achievement of the overall business strategies. an effective perfor-mance managem ent system (PMS) should include: ? A clear statement of mission and values.for every individual and for the company as a whole. A separate pay review in which the level of pay increase is based l argely on the actual level of achievement made against the prearranged objective s. the agreement can be likened to a psychological contract to which the individual is committed through mutual and open agreement. It is therefore vitally important that every individual has a clear understandi ng of his or her work objectives and responsibilities because performance will b e measured against these. Recognition. according to Armstrong and Murlis (1991:190). Step Two. ? A procedure for establishing individual performance 'Contracts' (based upon ps ychological contract principles). plus the allocatio n of performance rating by the manager. For this reason. Step Three.

An employee may work incredibly hard. Such an assumption. but whet her they are working better. they should be cautious that numerical measures of efficiency are n ot treated as more real than the activities they represent. This also means that measures of producti vity based on worker effort are similarly ill conceived. however. It seems. Routine tasks were deleg ated and skilled staff devoted more time to patient care. It is not. rather than the balance of payments. who point to the efforts which arise from the 'obsession' which many business commentators and mana-gers have with economic definitions of 'productivity'. IDS claim. IDS give the following exampl es: A comparative study of the hotel industry in Britain and Germany conducted by th e National Institute for Economic and Social Research. productivity measurement has got the focus wrong . and the ways in which those skills are utilized. but be involved in a pr ocess which is inefficient. they suggest that m ost organizations should be more concerned with questions of efficiency and that . the latter concern becomes a bsolutely crucial.level. This problem has been highlighted by IDS (1990c). even here. Costs were held steady while all the measures of quality and effectiveness of ca re showed an improvement. In particular. . The c hanges involved an increase in the number of other hospitals. a question of whether workers are working harder. Initiatives such as PMS assume that the structure of employment within organi zation is already effectively established and that appropriate performance measu res have been identified. We have already seen that one function of human resource auditing technique s is to cause managers to question the often taken-for-granted value.. since taken up at a number of other hospitals. The process is conclud ed by performance review. This is very di fferent from merely cutting costs on a bottom-line basis.revealed that German hot els were able to function with between 50 per cent and 70 per cent of the staff of their British counterparts. All too often. which serves both to take stock of what has been achie ved and to start a new cycle of the process again. The changes involv ed an increase in the number of registered nurses and a decrease in the number o f less trained staff (enrolled nurses and auxiliaries). too. above all in the key craft functions. what Is Important is the jobs that people do. which they put upon employees and their jobs. Achievement of the planned objectives is the subject of continuous asses sment and changes/adaptations made in the light of this. to identify what it is that ma nagers and employees do that is necessary. (IDS 1990c: 10) One way in which organizations have attempted to rethink the organization of emp loyment to enhance performance through greater efficiency is through a reassessm ent of working practice in tems of greater flexibility. The key difference was the level and mix of skill s in the German hotels. German hotels oper ated with many fewer unskilled workers and a larger number of qualified staff ca pable of a variety of roles. The same questioning needs to take place it. In this respect the key to measuring efficiency. A second case is the pioneering work on skill mix in the NHS done at the John Ra dcliffe Hospital in Oxford.. the area of performance management as here. needs careful considerat ion. As more organizations start to think about issues of quality and high value-added goods and services. to look at the effectiveness of organ izations and their members from the standpoint of the customer. is a qualitative one: namely. Instead it focuses up on the nature of the work that is done. the skills that are needed by employees. conventional measures may hind er as much as help when it comes to evaluating cuffent practice and the nee for change or innovation.from the organizational point of view. an d to cutting costs.

London: Cassell 8. M. R. P. and Maunders. Personnel Review 18(3): 3-12 4."Auditing the management of human resources in the NHS'. the acquisition and use of new skills. alt hough the reality of this position has been questioned by Garrahan and Stewart ( 1992).(1967) The Human Organization.:92). and Stewart.FLEXIBILITY AND WORKING PRACTICES Flexibility can be achieved at two levels: at the level of work practice (functi onal flexibility). London: Prentice Hall.(1987) Corporate Social Reporting. Dawson.(1992) The Nissan Enigma. C. and Lacey. Thi s is confirmed by IDS (1990d). and Morris. London: Sag e 3. 7. To this can be added a third category. and the elimination of inefficient demar cation lines. personnel manageme nt April. IRS(1992c) IRS Recruitment and Development Report 28. which invol ves the reorganization of working time (Blyton and Morris 1992). K. personnel Review 17(3): 22-28 13. T. IDS(1990c) IDS Focus 57 'The politics of production' 11. D. Gray. In practice it seems that most developments in terms of this form of flexibility have involved the relaxation of restrictive demarcation practices (Blyton and M orris 1992:306). April 10. Richards-Carpenter. BIBLIOGRAPHY 1. London: Mc Graw Hill 12. Giles.(1972) Human Asset Accounting. R. London: Cassell 6. London: Mc Graw Hill. and at the level of organization structure (numerical flexibi lity). J.(1992)'Capitalizing on devolution'. Computers in Personnel Conference. Malloch. This involved acce pting changed working practices. C. W. and Winchurch. 14. P. J. temporal flexibility.(1991) 'Molecular human resourcing'. Brighton: IMS/IPM: 77-84 . and Turnbull. Functional flexibility An example of functional flexibility is provided by Storey (1992) in the case of Ford of Britain's 1985 agreement whereby discretionary productivity allowances were made available at plant level with the provision that they become payable o nly to 'employees who cooperate with local management in ensuring maximum capaci ty utilization and the efficient use of manpower' (ibid. H. non-manual and managerial employees). this position involving a greater recognition by managements of the importance of respecting craft attitudes and adapting working arrangements to deepen skills . Bennison. Blyton . Garrahan. Wickens' (1987:52) account of flexibility at Nissan UK seems also to point in this direction (referring as it does to flexibility between product ion functions that can involve manual.E. so as to encourage versatility and flexibility. and Robinson. Brighton: IMS 9.(1981) Personnel Management: Human Resource Managem ent in International Firms. P. Likert. (1984) The Manpower Planning Handbook. the real task across a ra nge of industries is now to enhance and build on specific skills' (IDS 1990d:l).1988 and 1990 to conclude that although multi-skilling remains an aim. Flamholtz. IPM/IMS(1991) Computers in Personnel 1991 Conference Book. rather than thoroughgoing multi-skilling of craft workers. P. R.(eds) Reassessing Human Resource Management. (1992) 'HRM and the limits of flexibility'. in Bly ton.(1988) 'evaluating strategies on a cost-based manpower planning m odel'. P. 2.Basingstoke: Macmillan 5. which compares surveys from 1986. Woodward.(1989) 'The moving frontiers of personnel management: human resourc e management or human resource accounting'.

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