Human resource management has developed vital inroads into the business and organisational world. The large organisations and the MNCs are setting up a complete new department for the key purpose of managing the human resource of the organisation and hiring the new and competent human resource for handling the HRM. There are numerous benefits which are associated with the effective HRM practices incorporated in the organisations. Human resource management can be understood as the coherent and strategic approach for managing the organization’s the most component resource i.e. the human resource (Armstrong, 2006). The HRM practices can be considered as a set of the organizational functions which objects to manage the pool of human resource by ensuring that the resources are employed for the attainment of the organisational goals. The report will help in discussing the Human Resource Management Practices – Performance Linkage by the means of a literature review which will highlight the analysis, viewpoints and theories of various authors and researchers. There will be analyzed that in what manner the HRM practices have a direct impact upon the organisational performance both in a positive as well as negative manner (Bauder and Perle, 1999).
Impact of HRM practices on Organisational Performance
Over the decades, a number of researchers have dedicated a great span of attention and time to establish and investigate the interconnection among the organisational performance and the HRM practices. As per the various research analysis and data, it has become increasingly evident that human resource management is a vital component which has a direct impact upon the effectiveness of the organisation that leads to improved organisational performance. The authors have captured the performance outcomes of human resource management in many ways that comprises of organisational outcomes in respect with efficiency, quality and productivity; financial outcomes in respect with revenues, sales markets and profits; HR outcomes in respect with behavioral and attitudinal impact upon the workforce in terms of absenteeism, employee turnover, commitment and satisfaction. The various studies have demonstrated that certain HRM practices such as autonomy in the organisational workplace, increased discretion, team work, employee engagement and several employees related pay schemes have their significant role in enhancing the productivity and motivating the employees (Torrington, Hall and Taylor, 2005).
Researchers have performed an in-depth research on the impact of strategic HRM practices on various performance variables. In their research, they analyzed that the effectiveness and efficiency of the strategic HRM have a direct association with the employee turnover as well as the association among this organisational performance and the workforce productivity (Zehir, et al., 2016). In various organisations, it has been noted by the researchers that the HR practices had an effect upon the employee turnover and the relationship sounds to be positive between the productivity and retention aspects when the organisations incorporate high-involvement HRM practices and negative when there is lack of such practices (Lepak and Snell, 2002). Researchers indicate strengthening as the evidence of a positive association among the organizational performance and the HRM practices. The positive impact of the several HRM practices comprising team work, decentralization, employment security, status differences, incentives, compensation, selective hiring, extensive training and information sharing is on the various aspects of organisational performance that involves commitment, flexibility, cost reduction and quality related aspects (QUANSAH, 2013).
In the past decades, numerous authors have identified enormous number of HRM practices as influencing and the factor for impacting the organizational practices. But from the researches, few of the key practices have been recognized as the vital and significant in achieving the most positive outcomes for the organizational performance. Out of all the factors, the key attributes are reward and performance management, contingency management, training and development, and recruitment and selection. As per the researcher, the innovative and contemporary organisations consider the HRM practices as the key strategy of the organisation for encouraging customer relationships, improving empowerment and participation, enhancing organizational culture and encouraging team responsibilities (Ang, 2006). Some of the authors have accounted that the horizontally integrated and vertically aligned HRM practices and functions results in production of more committed employees that results in improvement in the overall organisational and individual performance. There are various other HRM practices which have been listed as the best practices by the authors for achieving the goals of improved organizational performance (Dennett, 2007).
The First and the key HRM practice is the recruitment and selection and optimum use of the selection tests for identifying the most potential and competent talent. The second practice is training which acts as a vital factor for having professional as well as personal development of the employees. The third key HRM practice is the effective job design for ensuring motivation, commitment and flexibility that comprises of autonomy offered to the employees to take decisions and fulfill responsibilities for utilizing their competence and knowledge (Campbell, 1999). Next HRM practice is the effective communication for ensuring that a two-way communication process keeps the employees completely involved and engaged. Next factor is programs related to employee share ownership for enhancing the awareness of the employees related to the implications of their respective functions and actions on the organisational performance (Lamba and Choudhary, 2013).
There are various theories and frameworks that have been developed for understanding the relationship between the organisational performance and the HRM practices. The one of the key framework is the 3cTER framework. This framework was developed by the authors by analyzing and evaluating the HRM practices of several companies. The framework explains concepts related to compensation and benefits, career development and culture building, training & development, employee-employer association and the recognition by the means of rewards and the importance of these concepts in the efficient organisational performance. According to this framework, if the organisation has HRM practices of strong culture building which can help the diverse workforce to have a similar culture without any kind of difficulty in adjusting, they tend to give improved performance. The second aspect of this framework states that if there are career-development related HR practices then it offers a chance of personal and professional development to the employees by that they can develop themselves and have further qualifications and career enhancement. If the employees get the opportunity of career development then they tend to have an increased organisational commitment (QUANSAH, 2013).
The third and one of the most significant aspects is compensation and benefits. If the organisation offer appropriate benefits and compensation to the employees and having HRM practices that are beneficial for the employees to get good compensation for several functions them it results in increased motivation of the workforce as it satisfy their needs as well as demands. And it enhances the productivity of the workforce to accomplish task in a more efficient and rapid manner. As per the next aspects of the framework i.e. training & development, employee-employer association and the recognition by the means of rewards, it explains that the HR department of the organisation must have its key focus upon the trainings offered to the employees, the rewards and recognitions that will be offered to the employees for appraising them for their skills and hard work (Bowen and Ostroff, 2004). It is also essential that the association among the employee and the employer must be good so that there can be develop a strong association which can lead to improved team work and communication and have positive implications for the organizational performance and productivity.
Another important theory that in respect with understanding the impact of HRM practices on the organisational performance is Social Exchange Theory (SET). It is a sociological or social psychological perspective which demonstrates the social change as the approach of negotiated exchanges among the two different parties. As per the social exchange theory in respect with the HRM practices and the organisational performance, it is stated that when the organisation incorporate effective HR practices and offers numerous advantages to the employees on one and then in return to this, the employees perform well and have their increased employee engagement and involved in the organisation (QUANSAH, 2013). This shows and exchange process between the organisational and the employees. There is also a negative side of the their as if the organisations do not implement improved HRM practices and have less emphasis upon the development of the employees and satisfaction of their needs then as a result their performances shows a downturn and the level of productivity and the organisational performance is negatively impacted (Locke, 1969). Thus, it is necessary to have a shared and mutual association from both the sides. To get positive organisational performance it is essential that the organisation must have effective HRM practices for the overall development of the organisational employees.
The next theories that underpin the practice of HRM include motivation theories and resource based view (RBV) theory. These theories are sound to be the most recognized theoretical frameworks that are applied in the researches that have a linkage between the organisational performance and the HRM practices. The RBV theory has a blend of the aspects of strategic management and organizational economies. The HRM delivers a strong value by the means of organisational strategic development by the means of rare, non-imitate and valuable human resources. As per the RBV theory the organisation achieves numerous competitive benefits as when the organisation have access to the most competent and valuable human resource than it results in faster accomplishment of the tasks and have improved outcomes and organisational performance (Snape and Redman, 2010).
Another related theory is the motivational theory of expectancy. As per the theory of expectancy, the employees expect that the organisation will have several benefit programs, reward and recognitions as well as employee development HR practices. If the organizational fulfill these expectations then it results in satisfaction of the workforce and needs and as a result the employees gives their hundred percent to the organisation and it results in better and improved organizational performance. The theory proposed that the individual’s performance is primarily depends upon the motivation level as in the HRM-Performance link there is a vital importance of motivation of the employees (Holbeche, 2004). The next theory that can have relation with the impact of HR practices on the organisational performance is the AMO theory i.e. Ability, Motivation and Opportunity Theory. As per this theory, Organisational Performance = Motivation + Ability + Opportunity. The organisations take use of this theory for framing their HR system and practices. The researchers have also argued that the impact of the HRM practices is completely depends upon the response of the employees to the various HRM practices. For the implementation and having improved results of the HRM practices there is a need to have highly involved, committed and competent employees so that there can be best implementation of the HRM practices. All these HRM practices influences the behavior of the employees and motivate them to work in a better way and achieve improved organizational performance outcomes. HRM practices therefore have a direct impact upon the individual as well as the organisational performance that leads to effective productivity, encourages and motivated staff and overall development (ALDamoe, Yazam and Ahmid, 2012).
Organisational performance, overall workforce productivity and the performance outcomes experience a direct impact of the various HRM practices implementing in the organisations. From the lenses of the various researchers and theorists, it has been stated and concluded that the behavior of the employees are influenced by these HRM practices which translated into the financial and performance outcomes. It has been evaluated that there are enormous number of HRM practices which affects the organisational performance. These HRM practices comprises of mainly the staffing techniques, training and development, performance evaluation, compensation, promotion, empowerment, rewards and recognition and grievances handling practices. All these HRM practices results in the HR outcomes such as the improved employee commitment, decreased employee turnover and absenteeism and enhanced employee productivity. It has been stated that when these HR outcomes appeared as a result of the HRM practices there takes place improved and efficient organizational performance. Thus, from the overall study, it can be concluded that there is a direct and significant linkage among the HRM practices and the organizational performance.
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