Literature Review of the Impact of Human Resource Management on Organisational performance

lit Review of the Impact of valet Re spring Management on Organisational carrying into actionOrganisations world encompassing be under pressure immediately to continu bothy remedy their executing. The field of operations trends behind these competitive pressures be world-wideisation, advances in information technology, and change magnitude deregulation of global markets (Becker Gerhart, 1996 Dany, Guedri, and Hatt, 2008). These changes eat up a crocked shock absorber on a countrys ability to maintain its competitiveness (Laprade, 2005). Without an efficient pastureforce organisations fall back their ability to compete, both locally and inter kingdomally, eventually leading to poor organisational slaying and thus ending up with little or no scotch success (Tomaka, 2001). Unlike in the past when natural options, technology, and capital utilize to be the key factors to determine the competitive advantage of the firms of one nation all over the early(a) nations, h omo resources today in modern propagation have become the most important resource for the firms to obtain strategical advantage over the other firms (Dany et al, 2008). This is because managers in both the common and tete-a-tete arena organisations touch on the human resources of their organisation as its major source of sustaining competitive advantage by having the best of the best Human resource agreements in place for recruiting, selecting, motivating, and efficiently managing their people (Mesch, 2010).As a ensue of these changes in the global economic environment business system, the field of human resource worry is rapidly changing more(prenominal) than ever today (Becker Gerhart, 1996). Furthermore, among all the organisation factors which contribute to organisational feat, the human resources are now regarded as the most fundamental factor (Mesch, 2010).Recent look intoes on HRM show vehement and positive human relationship in the midst of HRM practices and organisational doion (Carlson, Upton, and Seaman, 2006 Collins Smith, 2006). Therefore, it is vital for managers to have a better understanding of the role of HRM in order to score successful organisational performance.Accordingly this chapter presents a review of the literature, relevant to this research study, on the relationship among HRM practices and organisational performance.HRM and Organisational deedHuman Resource ManagementArm grueling (2006, p3) defines Human Resource Management as, a strategic and coherent draw close to the management of an organizations most quantifyd assets the people working in that location whom individually and collectively contribute to the achievement of its objectives.Human Resource Management is, the policies, practices and systems that influence employees behaviour, attitudes and performance (De Cieri, Kramar, Noe, Hollenbeck, Gerhart, and Wright, 2008, p5).Delery and Doty (1996) assert that the HRM best practices, once identified an d implemented would al ways stir improved organisational performance.Fox and McLeay (1992) found from their landmark empirical study of forty-nine companies, still of companies mainly from the UK engineering and electronics orbits, strong supportive influence between six critical HRM practices in achieving successful above average sector performance relationship, over a 10 year period. These HRM practices are (ibid) recruitment and Selection,Management Education,Training and Development, process Appraisal,Remuneration and Rewards, andCompany-wide Career Planning.Organisational PerformanceA recent definition of Organisational Performance is given by Antony and Bhattacharyya (2010, p43). They define Organisational Performance as, a measure of how well organizations are managed and the value they deliver to nodes and other stakeholders.According to Daft (2000) Organisational Performance is the organisations ability to achieve its objectives efficiently and effectively.Organisationa l Performance represents the value of the organisation in terms of the total contribution make by the efficient and effective management of its human resources (Neumann Segev, 1978).Chien (2004) strongly posits that organisational performance is composed of five major critical components. And these are (ibid, p290)Motivation Models,The Leadership,The organisational Culture and Environment,The pass away Design, andThe Human Resource Management Policy.Relationship between HRM and Organisational PerformanceThe traditional role of HRM in organisations was mainly to support the trading operations through managing people to win the employees organisational commitment to the goals of the organisation (McGunnigle Jameson, 2000). In consequence, HR managers had to strictly comply with the detailed procedures of personnel administration which drove the ways in which the organisations handled their human resource activities (Huselid, Jackson, and Schuler, 1997). The key HRM activities inc luded in this regard are recruitment, selection, performance measurement, training and development, and administration of allowance and rewards (Dany et al, 2008). In profit to performing these HRM activities HR managers have to create value for the organisations in which they work (Huselid et al, 1997).However, todays HRM focuses heavily on the organisations successful outcomes through the integration of the respective(a) HR functions (Dany et al, 2008). Ulrich (1996, p2) strongly suggests that human resources determine an organisations success in overcoming major challenges go about executives today globalisation, value chain for business competitiveness and HR services, change, attracting and retaining clever capital. Together these major challenges require that HR practices create and add value that provoke be measured reliably (ibid).Todays top performing companies give extraordinary attention to managing effectively the HR dimensions which affect employee behaviours mor ale, motivation, attitude, commitment, etc (Cadle Yeates, 2008, p28). apiece of these HR dimensions plays force-outful part in determining organisational success (ibid).Modern HRM global best practices include Lawlers (1986) High-Involvement Work Systems (HIWS), Appelbaum and Batts (1994) High Performance Work Systems (HPWS), and woodwind and Albaneses (1995) High Commitment Management. Research shows that these modern HRM practices have a strong and positive influence on organisational performance (Ramsay, Scholarios, and Harley, 2000).More and more researches strongly indicate that that there are positive links between HRM practices and organisational performance (Carlson et al, 2006 Collins Smith, 2006). For instance, Delery (1998, p289) asserts that, the methods used by an organization to manage its human resources dejection have a substantial impact on many organizationally relevant outcomes.Gerhart and Milkovich (1992) conducted studies to measure the impacts of compensa tion and rewards systems on the successful accomplishment of organisational goals and objectives. as well research study conducted by Terpstra and Rozell (1993) shows that five key HRM selection practices are linked to business profit. In his review of the key empirical studies on the relationship between HRM and organisational performance Ulrich (1997) writes that these studies investigated the impact of specific HR practices on specific successful organisational outcomes for example, effective HR practices in training and compensation were related to business turnover rate, labour productivity, and organisational performance. Ulrichs (1997) review summarised that the empirical studies were based on the assumption that efficient use of human resources through best HR practices would lead to successful organisational performance.Empirical studies conducted by Huselid (1995, p635) to assess the relationship between a set of HRM practices (referred by Huselid as HPWS High Performan ce Work Systems, which included extensive recruitment, selection, training procedures, formal information sharing, attitude assessment, and mull design) and organisational performance of 968 large companies have shown that there is a positive relationship between HRM and successful organisational performance. The key organisational performance measures used to evaluate the full(prenominal) performance HRM practices in the empirical studies included labour productivity, financial performance, and turnover (ibid).Delaney and Huselid (1996) investigated the effects of recruitment and selection, compensation, training and development, decision making, complaints and grievance procedures, promotion practices, and the have synergetic impact of these HRM practices in 590 for-profit and not-for-profit companies. Overall, their study concluded that these progressive of HRM practices were positively associated with firm performance.Harel and Tzafrir (1999, p186), based on their extensive t heoretical and empirical research as well as from the prior studies conducted by other researchers in the HR field, have identified six core components of strategic and universalist HRM best practices that are strongly related to organisational performance. These 6 core components of HR best practices are (ibid)RecruitmentSelectionCompensationEmployee Participation natural Labor Market andTraining.Likewise Becker and Huselid (1999) strongly agree with the seven lofty performance HRM best practices put forward by Pfeffer (1998) as having strong links to organisational performance. These 7 high performance HR best practices are (Pfeffer, 1998, cited in Huselid Becker, 1999, p297)Employment SecuritySelective HiringTeams and Decentralized Decision-makingHigh contributeExtensive TrainingReduced Status DistinctionsExtensive Information Sharing.Each of these seven high performance HRM best practices offer options for the HR professionals to make the appropriate ones for enhancing the o rganisational performance and at the same time one should toy with that each of these HRM best practices form an integrated high performance HRM system (Huselid Becker, 1999, p298). risees to Examine HRM and Organisational Performance RelationshipThere are two major fundamental approaches to study the relationship between HRM and organisational performance. These are termed asBest-Practice approach, andBest-Fit approach.Best-Practice ApproachThe best-practice approach claims that HRM practices are universalistic and thus any organisation give the bounce obtain enhanced organisational performance by adopting the HRM best practices for managing people in any organisational circumstance (Boxall Purcell, 2000).Best-Fit ApproachOn the other hand the best-fit approach argues for a vertical fit whereby the HRM systems are integrated with the corporate strategy of the organisation for obtaining improved organisational performance within a specific organisational context (Boselie, Paauw e, and Richardson, 2003).Between these two approaches, the best-practice approach is considered to be superior by HRM professionals and researchers for examining the impact of HRM practices on organisational performance ((Hoque, 1999, p422).Cautions in Examining the HRM and Organisational Performance RelationshipAlthough there is wide support to the idea that HRM practices lead to improved organisational performance yet there are some cautions that have to be observed. Huselid (1995), states that successful organisational performance has been obtained by high-performance firms since they were able to afford expensive HRM systems and practices and this may not be affordable to most other firms.Furthermore, leadership style could have a stronger impact over the deployment of HRM practices due to the different types of influences which the leaders can exert on their people (Becker Huselid, 2006).Organisational Performance in Public Sector OrganisationsThe power and water sector in Oma n is a not-for-profit sector. As stated preliminary (in chapter 1) the power and water sector in Oman is striving for reducing its run costs. Only those not-for-profit organisations which possess human capital resources that operate with increased professionalism and more advanced multi-tasking skills through enhanced productivity (and thus ensuring and effecting control over operating costs) can accomplish their mission successfully (Mesch, 2010). Furthermore, in the generation to come, the not-for-profit sector has to inevitably pursue more efficiency and with more economies of scale in order to provide cost-effective services to their stakeholders and prove organisational authorisation (ibid).Evaluating organisational performance in the public sector organisations is not easy and this is get along compounded by the fact that measurement of organisational performance in the public sector has not been developed in the organisation theory literature (Waheed, Mansor, and Ismail , 2010). This primarily because of the following factors that are unique to public sector organisations (ibid, p330) miss of well-defined objectives and large number of multiple objectivesCentral administrationabsence seizure of generally accepted performance indicators for measuring organisational performanceDiffused and more often than not fragmented responsibility because of the interdependency of the performance of the public sector organisations. As a result of which accountability is difficult to extract.Evidence from their review of the circumscribed literature available on organisational performance in the public sector organisations show that the three most common major indicators (the other not common indicators are relevance, and efficacy) of organisational performance used in the frameworks provided by the various researchers are (ibid, pp331-336)Efficiency,Effectiveness, andInnovation.Katou and Budhwar (2006) studied 178 manufacturing organisations in Greece to invest igate the relationship between the HRM systems and policies and organisational performance. Their study used the following indicators of organisational performance from their literature review (ibid, p1226) which can excessively be applied to service organisations as wellEfficiency practise of fewer resources to achieve organisational objectivesEffectiveness achieving the organisational objectives successfullyDevelopment developing and construction the capacity of the organisation for meeting the future challenges and opportunitiesSatisfaction satisfying all the key participants customers, stakeholders, and employeesInnovation of products and the related processes andQuality enhanced higher fictional character of products (services).SummaryThis chapter reviewed the available literature relevant to this study on HRM practices that can improve organisational performance. The above review of HRM literature shows that HRM best practices is distinctly composed of recruitment and sele ction, training and development, compensation and rewards system, information sharing, and employee participation.Organisational performance can be measured through the successful organisational outcomes in the form of efficiency and effectiveness, customer satisfaction, service quality, and labour productivity.