Strategic HRM and the Informal Organisation
Truss, (2001) highlights the importance of how policy is translated into practice through the lens of the informal organization. In a study of Hewlett-Packard, Truss identifies the importance of the informal organisation as a mediator between HRM policy and the individual employee. It is these informal networks of communication that are seen to have the greatest influence over the impact of HPWS. However, due to the HPWS close link to formal policy and practices, this incompatibility in communication delivery to employees will result in many organisations failing to achieve the performance gains they expect.
Other issues to consider in this debate is the national context in relation to HP model diffusion. Lismen et al (2004) in a study of multiple industries in Hong Kong found that Hong Kong organisations tend to focus heavily on short-term results.
This has created a unique HR market in Hong Kong, with many organisations experiencing very high levels of employee turnover, as workers show little long-term loyalty to any single organisation. This is obviously incompatible, with the long-term commitments needed by organisations to invest in HPWS, which rely on permanent staff on which performance gains can ensue.
The majority of evidence shows that there are certain HR practices such as employee involvement, training, alternative pay systems, which have significant positive (additive) relationships on organisational performance. Furthermore, there is evidence that when these practices are used together in a system, there is an even greater (multiplicative) productivity improvement. However, despite this, it is still not possible to find a causal relationship between HPWS and organisational performance.
Another significant reason for the limited widespread use of these systems is the financial and opportunity costs of implementation. This is something that is generally outside HR academics comfort zones, which means it tends to be overlooked in research. However if the continuing costs of implementing these systems outweighs the marginal gains in performance, then it is clearly best to abstain implementation of HPWS.
In addition, when deciding an organisational budget that is closely linked to the corporate strategy, top management may find it difficult to divert resources to such ‘unknown’ area as SHRM, than to more understandable and tangible areas such as Marketing or Production. Management draw upon their experience to make key decisions, so the limited widespread use of these HPWS may simply be due to management not understanding them, and as a result do not allocate sufficient resources, which does not allow a complementary bundle of HR activities to be implemented, which is a core criteria for achieving performance gains.
Also, widespread use indicates cross-market applicability of HPWS, however there is evidence to suggest that these HPWS will benefit organisations more in some markets over others. For example, those organisations in manufacturing and internationally competitive industries, where there is a greater objective and quantitative measure of performance are expected to have clearer tangible achievements than those organisations in customer orientated industries, such as service organisations and consultants.
It is also apparent, that good leadership is crucial to the success of HPWS without clear direction and clarity of mission, employees maybe pulling in opposite directions, instead of working towards a common goal. “Leadership is the lifting of peoples’ vision to a higher sight, the raising of their performance to a higher standard, the building of their personality beyond its normal limitations” (P.F. Drucker, 2001) Even the best funded SHRM activities may easily fail without clear direction and targets implemented through effective leadership.
HPWS are about creating a working environment that encourages and facilitates improved productivity. However we must not lose sight of the wider environmental influences on organisational performance. Although, it is relatively safe to conclude that if all other elements of the organisation remain ceteris paribus, the implementation of HPWS will produce performance gains. However, this argument is largely academic and bears little use in the rapidly changing environment of business reality and because of this complexity, the application of these HPWS is significantly limited. Let us remember that in many struggling industries, organisations first method of cutting costs is to reduce staff.
Until industries and markets begin to widely appreciate the strategic value of HPWS their will continue to be low usage. Once appreciated, it will become valuable to management to be educated in SHRM and as such either a standardisation of universal ‘best practice’ bundles of HR activities will become widespread, or the research will fragment and specialise into certain industries for which a ‘best fit’ bundle of HR activities will be specifically chosen for the organisation in their market. However, until this time, there is much opportunity for further research and theory on this subject.
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