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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Arguments against HPWS

The exact performance gains of HPWS are poorly specified. It is often the case that performance gains may come more from increased employee effort rather than because of the activities of a HPWS. Edwards and Wright (2001) argue that High Involvement Work Systems may simply remove prior inefficiencies rather than make new contributions of its own. This means that the scope for performance gains is seen as limited, once any obvious problems have been addressed. However it is clearly possible that any effective HR manager could resolve these inefficiencies without the aid of HPWS.

Their has been criticism for the short term productivity decreases caused by HPWS, due to the process of removing employees from their specific job. However, in response to this, Huselid and Becker (1996) argue that when these HPWS are vertically aligned in conjunction with a corporate strategy then organisational performance is more likely enhanced, although many organisations find this a difficult and complex process due to the changing external environment, forcing changes in strategy, limiting its widespread application.

The use of different terminology by researchers has caused much confusion. In some cases HPWS are called ‘high-commitment management’, ‘high involvement management’ ‘high performance work organisations’ ‘high involvement work practices’ (Wood, Lawler). Whilst these studies are referring to the same general phenomena the use of different ‘labels’ has undoubtedly added to the confusion. Without a single and well defined term, researchers have missed many opportunities to sell the ideas to the business communities.

Wood and de Menezes, (1998) argue that there is a ‘pick and mix’ approach to the HR practices bundles. For example, The DTI (2005) identified 35 practices, while Guest (2000) used 18 practices in his UK study and Pfeffer (1994) identified 16 then reduced this to 7 in 1998. The use of different ‘lists’ of HR practices which are seen to contribute to these HPWS only adds to the confusion and detracts from the overall credibility of the research.

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Organisational issues

Appelbaum and Batt (1994) in their review of various surveys of work practices showed that many organisations are failing to recognize the importance of HR practices. Many firms implemented a few innovative work practices but these practices were not widespread throughout the organisation.

Ichniowski et al. (1996) identified some barriers to diffusion such as; labour-management distrust and restrictive institutional and public policy.  In addition, Appelbaum and Batt (1994) argue their is the dilemmas facing firms and managers; union and worker resistance and institutional barriers.   However, these are merely suggestions as these academics did not undertake any systematic investigation of these barriers to diffusion of the HPWS.

There is also an issue with the relationship between the effectiveness of HPWS and organisational resources. Orlando and Johnson (2001) argue that firms with higher performance may simply have more resources to devote to their HR practices, despite any positive correlation between SHRM effectiveness and performance.  In addition, some cross-sectional studies have identified a reverse causality with higher performing organisations implementing more effective HP practices and systems through changes in employee attitudes (Schneider et al 2003).

Also, the organisational strategy will influence the effectiveness of HPWS. Guthrie et al (2002) show that organisations which pursue a differentiation strategy, will benefit much more leading to increased levels of productivity. This is congruent with the research of Whitfield and Poole (1997) who state that organisational structure and culture can create problems, for example, HIWP in highly bureaucratic and formal organisations will be particularly problematic due to the resistant and rigid nature of change.

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High Performance Work Systems (HPWS) are one of the emerging concepts in the field of Strategic HRM, concerned with utilizing ‘bundles’ of HR practices which are designed to maximise the value of employees to improve organisational performance. Their have been numerous studies on the performance gains of these HPWS, which will be discussed, as a means to determine the key reasons behind the limited penetration of these models within business organisations.

HPWS are collections of High Performance Work Practices (HPWP), which together act as a set of complementary ‘bundles’ of activities which are seen to improve productivity, employee satisfaction and the general working environment.

There is a wealth of strong evidence for the organisational performance gains of HPWS. MacDuffe (1995) in a study of an US Automobile manufacturers found that by using a system of practices such as training, job rotation and team working, the production time per vehicle was significantly reduced. Additionally, Huselid (1994) found that by using a HPWS of practices focused around employee involvement and skills motivation, sales per worker increased by 16%.

The Department of Trade and Industry (DTI) in 2005 conducted an extensive study of HPWS, they described 35 HPWP linked to organisational performance. The study found that organisations which adopted more of the 35 HPWP had higher levels of employee involvement and greater effectiveness in many areas, not just HRM activities.

Pringle and Kroll (1997), argue that employees are more likely to lead to a sustainable competitive advantage when the environment is changing rapidly. Youndt et al (1996) also comments that due to the forces of globalisation and international economic change, which are seen to weaken traditional market assets such as financial resources and economies of scale. It follows that people may be the “ultimate source of sustained advantage” since their value can never diminish or be imitated.

The literature shows that numerous studies have found ‘relationships’ between HPWS and organisational performance, however none have been able to determine a causal relationship and it is arguable that HPWS cannot be tested in isolation of all other business components.

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Continued from Arts and Marketing….

The arts industry is particularly distinctive, as unlike many traditional industries, successful products do not undergo modifications to extend their product life cycle. Instead successful shows or performances will simply be stopped after a certain time period to make room for new material. Due to this distinctiveness, traditional marketing cannot simply be implemented in arts organisations using toolkits.

The customer/audience is an intrinsic part of the arts. Art performances, whether they are cinema, theatre, orchestras create a temporary relationship with the audience. My point is that the two are inseparable, you cannot have a performance without an audience and the audience does not exist without a performance. However, the literature emphasises a relationship that seems to be very one sided with the arts simply generating material in an almost trial and error manner, where the successful products are popular with the masses and therefore become estranged from high culture and where the unpopular either disappear or become supported by high culture enthusiasts.

Overall the Scheff and Kotler (1996) article outlines that when artists have the authority to run their own operations and produce the material they wish to perform without considering the audience is how problems occur. The authors then go on to argue that a greater integration of artists, management and marketers, with greater emphasises on marketing issues will go far in solving much of the ‘art crisis’ The authors neatly describe this as instead of artists selling the idea that this is “good for you”, marketers should be integrated in translating the message so that the public receives this message as, “this is good”

Although, how much does this article contribute to the arts marketing debate? Well, the conclusion offers a neat summary of the argument, however does not really offer an answer. There are no outlined aims or objectives at the beginning of the article, so it is difficult to understand the contribution and merit of this article in terms of its use to arts organisations, the authors provide partial observational answers, but most are vague and have been previously stated much more comprehensively in other sources. This article serves as a useful summary of the problems and issues concerning the arts organisations, in relation to historical context and case study evidence, however its applications are limited outside of this.

Butler (2000) takes a different perspective on the overall critical thought into arts marketing, compared with other academics in this field. This presents a few implications, Butler’s article is relatively original in content, meaning that previous literature on arts marketing is not considered as accurate or valid, or alternatively Butler’s perspective is considered by other academics to be divorced from the more traditional mainstream thought. Personally, I believe that Butler’s explanation of the distinctive characteristics of the arts is much more realistic and useful for the arts industry organisations, in order understand and benefit from theoretical proposals to improve marketing and management practices in arts organisations.

In general the chapter extract by Fraser et al (2004) in my opinion has little to offer the arts marketing debate, useful contributions are rare and often end in a tangent to an peripheral subject.
For example parts of the extract and vague and make weak criticisms, such as the use of credit cards to purchase multiple tickets is criticised because it does not allow marketers to reach customers who have tickets bought for them. This is a unconvincing criticism, as surely a medium which can improve the accessibility to the arts, which is mentioned as a critical factor by Butler (2000) and a medium that can provide a facility to increase audience numbers and sales revenue, these benefits must outweigh the issues in promotion, which arguably need to be addressed if they are already attending the events.

So Arts marketing, what is it? And what should organisations do to improve it? Well the answer is unclear at best, although we can make a few observations. Much of the literature tends to agree that traditional marketing concepts and “toolkits” cannot simply be implemented to arts organisations without some sort of modification to account for the distinctive industry variables, described by academics such as Butler.

Another common theme is that the arts needs to professionalise. This refers to the increased integration of artists, management and marketing representatives to make key decisions. Although it is difficult to determine how much art should be compromised to meet customers needs and therefore improve profits. For example a more compromised approach towards that of film shows there is room for much profit which could in the long-term improve facilities and resources allowing greater innovation and freedom for creativity. However, the uncompromised areas of the arts such as Opera and theatre which are produced in terms of artistic expression may not be the most profitable areas for arts organisations, however the day that we pursue profits over advances in expression, creativity and culture will be a sad day for humanity.

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Continuted from Arts and Marketing…

Butler highlights the disproportionate amount of funding received by ‘high culture’ arts, despite have the minority of customers compared to popular culture. A recent report showed that £400million in private investment goes to the top 50 organisations of which 74% are in London. In addition he shares similar arguments in terms of high culture being classed as noble and popular culture being referred to as vulgar.

The Butler article also raises an important issue of access, in terms of value delivery of the arts. This refers to the psychological and behavioural barriers that the public attach to the high culture arts, such as fear, intimidation, risk of financial wastage, lack of knowledge of proper etiquette or attire. Butler argues that the arts should make themselves more accessible to the wider public through popular brand sponsorships, familiar formats such as CDs, DVDs. However, this runs the risk of damaging the integrity of the artistic material and mongrelising the cultural appeal.

In my opinion the chapter extract by Fraser et al (2004) has the least to offer the arts marketing debate out of the primary studied literature. It is unspecific and vague in its objectives and does not meaningfully examine the key issues in arts marketing as its title suggests.

In parts the extract is hypocritical, for example despite opening with questions over the transferability of marketing concepts to arts marketing, the extract does not address any examples, issues or problems in this area in any great depth or detail.

Another issue with this extract, is the claim that the common theme of art forms is the service element where production is inseparable for consumption. However, this is clearly not the case with such art forms which the authors even define to include film and sculpture, which are clearly produced separately and then consumed by the audience at cinemas or galleries in isolation from the artist

In addition, the authors construction of argument often fails to expand and often goes on a tangent to the opening point. For example, the service element sentence as mentioned above, is then followed by a paragraph on competition and customer loyalty and involvement. My criticism is that some of the issues raised are not well explained and fail to get across any meaningful issues which could be useful to the field of arts marketing.

Generally the arts are much more intangible than other services. Shostack (1977) argued the notion of the services lying on a continuum of tangibility, with tangible services such as a haircut at one end of the spectrum and arts performances, where the customer simply experiences a performance of a play or orchestra which is highly subjective and intangible.

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Continued from Arts Marketing….

The arts seem to exist on a continuum, with mass production at one end, such as cinemas and TV programmes to niche production, fine art and high culture at the other end. A key point to make is that unlike traditional marketing focus, the customer is only an element in the production of these arts, not the primary factor.

Although failing to define concepts, Scheff & Kotler (1996) do leave clues in the article as to their opinions on the arts. They state that ‘Art is a pure expression. it is visionary and when successful, it leads an audience on a journey that for many is a previously unimagined experience.” This statement gives clues to the authors perspective, as clearly been positive about the arts, which may bias the conclusions of the articles.discussion.

Scheff and Kotler are very descriptive in setting the scene of the ‘arts crisis’ however, the authors fail to comment upon the poor management of the situation, it seems almost common sense to suggest that if resources and funding is declining, to scale down operations and sell off assets in order to rebalance costs and revenues to a position so the arts groups would not become bankrupt. It is understandable that there is a limit to how much operations can be scaled down, in terms of a set number of musicians in an orchestra and their wages etc. however good management should be able to compromise to meet the needs of the situation, and with much of the arts being managed by arts professionals or enthusiasts, the priorities of arts organisations were simply not matched to the external environment.

Also we must be aware of some subtle literary issues in this article. Scheff and Kotler’s ongoing example of symphony orchestras in the article clearly mentions that the productivity of musicians does not increase, however their wages do by 4% per year. They compare this to the labour industry in which productivity has doubled every 29 years, however they do not mention that these industries have also experience continuous wage increases, which affects their cash flows. Subtle gaps in the arguments occur throughout this article and seem to guide and persuade the reader into the authors line of reasoning, instead of presenting an objective and unbiased argument.

Despite, criticisms Scheff and Kotler’s article has some astute observations. It makes sense that arts managers must reach outward to making art part of people’s everyday lives, as well as professionalising their management and marketing to approach tasks strategically. Also the marketing response interpretation of the main elements of the marketing strategy in relation to focus on the mission, core competencies and quality are logically sound, despite offering no examples or suggestions in relation to the case study.

Butler (2000) examines arts marketing from a European perspective, he sees traditional marketers as arrogant, by attempting to take a set of marketing tools and techniques and generically applying them to arts organisations. He describes what he says is a ‘gap in the literature’ before 2000, where arts marketing articles tend to describe the problem and prescribe a solution with “toolkits”.

Butler states that the arts industry is particularly distinctive, as unlike many traditional industries, successful products do not undergo modifications to extend their product life cycle. Instead successful shows or performances will simply be stopped after a certain time period to make room for new material. This increases the need for the Arts to professionalise, in terms of acquiring more efficient and effective management techniques, however Butler is quite vague in his suggestions as to how to more effectively market the arts to counter these distinctive industry qualities.

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Arts Marketing

Introduction

This essay will critically analyse the literature surrounding the concept of Arts Marketing, with reference mainly to the primary articles by Scheff & Kotler (1996), Butler (2000) and Fraser et al chapter extract.

Through out much of the literature, many authors present quite vague definitions and some avoid them altogether. If Arts Marketing does not have a clearly and widely accepted definition, the development of this field will be fragmented and of little use to arts organisations. Diggle (1986) presents a vague definition, ‘The primary aim of arts marketing is to bring an appropriate form of contact with the artist and in doing so arrive at the best financial performance that is compatible with the achievement of the aim’ However, this definition contains no mention of many of the key issues raised in the primary literature, which will be discussed now.

Some authors do define ‘the arts’ however is this enough? Since much of the literature demands a distinctive approach to “arts marketing”, it seems strange that definitions seem to concentrate on ‘the arts’ with the traditional definitions of marketing bundled in. Scheff and Kotler (1996) do not clearly define what they mean by ‘the arts’ or ‘arts marketing’, and so is difficult to put their argument in an appropriate critical context.

Fraser et al (2004) broadly define the arts, in terms of performing arts, jazz and popular music, drama, opera, theatre and film and visual arts. However, later in the argument they state that “it hardly seems to matter which particular art we are addressing.” This contradiction is one of many, limiting the contribution of this extract to the arts marketing discussion.

Butler (2000) does not provide definitions for terms and is not explicit in the aims of his article, however he does put the argument in context with the art industry as an important area for study in size with 1.8million people, 113,000 art organisations and its unusual characteristics for integrity and quality.

Scheff and Kotler (1996) highlight the existence of the arts paradox. They claim that a fundamental element of the arts is to challenge and provoke its audience with new and stimulating material, which is clearly not designed to meet all customers tastes. In contrast the marketing concept states that organisations of any kind should as their primary purpose satisfy consumers wants and needs profitably. So there is a clear division in direction between the two.

The issues with this paradox, is that the arts clearly needs customers to financially survive, however it cannot tailor its product to satisfy customer needs without compromising on quality. The logical solution seems that the modification of the arts must come from other areas of the marketing mix, in terms of Price, Place and Promotion, however much of the literature does not focus on these areas.

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