Human Resources Reputation and Effectiveness | Analysis

“Human Resources Reputation and Effectiveness.”

SUMMARY OF THIS ARTICLE

This issue of Human Resource Management Review considers the past, present, and future of HRM theory and research, exploring how these issues have considerable potential to enhance organizational efficiency and effectiveness. The compilation includes suchthemes as identifying the shortfalls of the science of HRM; predicting, understanding, and influencing the behavior of individuals in organizations; and the status of research on compensation in organizations. Organizational theorists have suggested that reputation is one of the few resources that can give firms a sustainable competitive advantage, because it is viewed as a non-tradable, non-substitutable, non-imitable, resource that can be managed.

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HR-firm performance linkage examines the impact of an overall set of HR practices on firm performance. This perspective advanced the literature from examining the effect of a single HR practice on performance, to examining a set of practices that work together synergistically. Another perspective explains the positive findings between HRM and firm performance by emphasizing the role HR plays in implementing strategies. To effectively implement a particular strategy, HR practices must “fit” with the strategic goals of the firm. The two studies indicate that HR reputation does have an impact on the larger overarching image of the organization. It is important to have an HR reputation of fairness, and to advertise this quality to important stakeholders.

It is important to examine the more intermediate linkages between HR reputation and firm reputation and performance. It would also be interesting to examine negative HR reputation signals, and their impact on the reputation of the organization. Employees are likely to recommend an organization for employment when that organization is fully committed to work-family policies.

As human capital continues to gain credence as a critical resource, organizations have viewed their HR departments as holding the key to unlocking this important resource. Thus, the power of HR has increased over the past several years, and should continue to grow. In light of the foregoing review and evaluation, and the strengths and limitations of prior work on HR reputation and effectiveness the authors have proposed some directions for theory and research in this area that they believe could result in useful and productive streams of work.

“Effectiveness Index” can be one of the tools to identify firms with very progressive or reputable HR functions. Also, the need to determine what might be the underlying dimensions of HR reputation, and, if multi-dimensional, are all dimensions equally important for effectiveness, or are they differentially weighted?

Firms bring about this publicity by taking non-conforming actions and proactively seeking to manage impressions to facilitate their own celebrity to the degree that celebrity increases access to critical resources such as human capital, capital markets, and raw materials, celebrity status for the firm increases a firm’s competitive advantage. Many firms such as Johnson & Johnson, Starbucks, and Hewlett-Packard, frequently hit these lists year after year and are on several lists each year. Many of these firms are known for their ability to “partner” with the HR function to facilitate strategy execution, administrative efficiency, employee commitment, and innovation.

At such an early stage in the evolution of this area of scientific inquiry, it is not clear that HR reputation necessarily has only linear relationships with outcomes; such relationships could be non-linear in form. Perhaps there is an optimal level of reputation for the HR sub-unit, and that a ‘more is always better’ is not accurate.

AUOTHERS CONTRIBUTION IN THIS ARTICLE

The author has given a brief and precise history on the evolution of Human Resource Management as an important part of any organization from a record keeping employee towards a strategy building. As the number of personal policies continued to increase during the 19th century the importance of human resources management grew as well. Author have noted down that Competitive advantages, such as organizational culture, employee morale, and worker loyalty, fostered by HRM practices, are more difficult to imitate than manufacturing processes or cost management strategies.

CRITICAL REVIEW

What is interesting about this information?

This article revolves around the evolution of Human Resource Management as the integral part of any organization to run smoothly. From the clerical job of just an employee record keeper to a strategic human asset manager this article has evaluated status of theory and research on HR reputation and effectiveness, and recommends directions for future work.
The article starts of by looking at the beginning the change chain in the HR function progression. Born from the industrial relations movement, personnel management was first examined in 1920 by Tead and Metcalf. And During the industrial revolution, utilizing the scientific management of work (e.g., Taylor, 1895), companies began to quantify “… the most efficient method for performing each work task, piece-rate systems of compensation to maximize employee work effort, and the selection and training of employees based on a thorough investigation of their talents and skills”

Starting from the first look at HR function more seriously in 1920 it has moved from the century focusing on the years which hold importance towards the shaping of HR functions as we see them today. In 1925 Craig & Charter adding to the chain proved that personnel management 1) became autonomous from the line managers and foremen, 2) turned an interest to psychology, 3)said a firm must be focused on leaders’ ability to “…effectively deal with employees and earn their loyalty and support” As in 1926 Lewisohn noted, the inherent labor problems that exist between workers and organizations were not a matter of capitalistic dialectic incompatibility, but, rather, incongruence between “…the organizational and administrative practices of management.” Thus, the core of a good organizational-employee relationship is recognizing and capitalizing on the mutual interests of maximum satisfaction and financial return (Filene, 1919).

More work was done by Follett and Tead in 1929 and further by Kaufman in 1993 which said “To obtain cooperation, trust, loyalty, and hard work among employees, firms must attempt to simultaneously fulfill the goals of the worker and the organization” As the number of personal policies continued to increase, so did the importance of human resources management (HRM). As HRM grew, even more laws and regulations were passed in the 1950s and 1960s that promoted equal and fair treatment for all able workers (Russ, Galang, & Ferris, 1998). However, it was not until the 1970s and 1980s, when U.S.-based companies realized that their technological processes were no longer a source of sustained competitive advantage (Pfeffer, 1994), that HRM was viewed as impacting on organizational performance.

As explained by Barney (1991), in his resource-based view of the firm, in order to remain profitable in the long run, organizations must have a sustainable competitive advantage. As organizations placed more emphasis on the human factor, the field of human resource management was formed from a result of various scientific fields of inquiry such as industrial relations and psychology (Dulebohn et al., 1995).

In the last 15 years, HRM has further justified its strategic importance, increasingly being viewed as a key resource organizations possess (Pfeffer, 1997), and an essential link in firms’ strategies (e.g., Arthur, 1994; Huselid, 1995). As human resources are managed appropriately by matching unique internal processes with environmental opportunities and needs, HRM has the potential to be a source of competitive advantage over other firms in the industry. In turn, HRM has been held more accountable to contributing meaningfully to firm performance. Because human resource management is now seen as an important factor in organizational performance and effectiveness, the power and, as a result, the reputation of HR also has increased.

How does the author(s) support the hypothesis?

Reputation of the firm in the market is based on the Human Resource as an asset to the firm. By quoting; The study of reputation in the organizational sciences largely has been focused on reputation at the corporate level. Organizational theorists have suggested that reputation is one of the few resources that can give firms a sustainable competitive advantage, because it is viewed as a non-tradable, non substitutable, non-imitable, resource that can be managed (Barney, 1991; Kothaa, Rajgopala, & Rindova, 2001).

Work done by Reed & DeFillippi, 1990; Barney, 1991; Lado & Wilson, 1994; Huselid 1995; Delaney and Huselid, 1996; Ulrich, 1997; Becker & Huselid, 1998; Boxall in 2003; Lawler & Mohrman in the year 2003;; Colbert 2004;; Hatch & Dyer, 2004; Bowen & Ostroff 2004 showed that personal reputation is a collectively agreed upon perception by others, and that reputation exists in a vacuum of imperfect information. When an audience is attempting to gather information regarding an individual (or organization), reputation is relied on to “fill in the blanks.” This is similar to corporate reputation theory in that personal reputation is based upon social norms, as opposed to market norms. Established upon the notion that reputation is related to social norms, current research suggests that to successfully acquire a reputation, an individual or organization must “stand out” from others in the field. Rindova, Pollock and Hayward (2006) reflected these beliefs in a recent piece devoted to celebrity firms, acknowledging the relationship between reputation and celebrity. Suggesting that reputation reflects a predictive measure, they argued that both celebrity and reputation are based on others’ perception of some entity.

Similarly the department level reputation depends on the production of the department individuals respectively and collectively different departments form the reputation of the organization as a whole. This view is supported by work done in 2005 by Roberts. Research in CEO celebrity has shown that a leader’s reputation may change the reputation of the company (Hayward, Rindova, & Pollock, 2004). Logically, the same process should apply to departments. If an HR department has a strong, powerful leader, the members of the department should feel an increase in power (Cialdini et al., 1976). Consistent support has been found for the HRM firm performance link in the literature, and with the continued development of theory, a richer understanding of how this relationship occurs can both advance the literature and facilitate improvement in practice.

The theoretical underpinnings of the literature examining the relationship between HRM and firm performance have developed from;

o Examining specific sets of HR practices.

o Examining a match between HR practices and strategy

o Examining the role of HRM in building and maintaining organizational resources and capabilities that contribute directly to a firm’s competitive advantage.

The linkage between HRM and performance has be identified by the authors on the work done by Barney, 1991; Lado & Wilson, 1994; Ulrich, 1997; Becker & Huselid, 1998; Perry-Smith and Blum 2000; Boxall, 2003; Lawler & Mohrman, 2003;, Ranft & Lord, 2000, 2002; Collins & Clark, 2003; Colbert, 2004; Hatch & Dyer, 2004; Bowen & Ostroff, 2004; Hatch and Dyer, 2004

HR reputation does have an impact on the larger overarching image of the organization. It is important to have an HR reputation of fairness, and to advertise this quality to important stakeholders. Although only one of the signals from the study affected share price, there may be other advantages of HR reputation at the firm level that are just as important, such as performance, labor costs, and employee turnover. This theory is based on the work done by Wright, Ferris, Hiller and Kroll in 1995; Hannon & Milkovich in 1996 and Koys in 1997.

What is the main aim of the article?

The aim of the article is to provide a base line from the work done throughout the 19th century on the importance of the Human Resource Management as an integral part of the success of any firm. And to provide the readers with information from so many writers from 1920 to 2006 in the history of HR functions enabling the reader to suggest even more on the basis of research work done by them working in their environment any where in the world as human psychology is ever changing.

Is the article timely?

In the era of fast growing technology and change in almost every firm around the globe the need to develop and consider human resource as an integral part of any organizations success is the key as we read in so many journals and magazines such as “Times” and “Business Recorder” the stories of better human resource management success stories of successful companies, it does show that the importance of HR in any firm can not be ignored any more. This article was published in the year 2007 which is to me some what late because of the already changing trends in organization management. So I would have liked the article to be published before the beginning of this century as the boom in technology and industrial revolution has forced companies to review their HR policies and still there are many countries and firms around the world which lack the awareness of the importance of HR as an important mix in the success of their company.

Is the methodology appropriate? Any weaknesses?

The authors supported their perspective by using quotations and the research work done by over 20 people; from different research papers, articles, books and publications from the year 1920 to 2006. As they moved along the history starting from 1920 little indication of any work between 1930 and 1990 is given. Which I believe has left a big gap in the research work. Although some indication has been given that not much work was done between theses years to promote the importance of HR.

Suggestions for future theory and research remains incomplete as many of the ideas merely seem to be repeated of what they have explained in the previous sections. For example: Just as celebrity status for a CEO or a firm has been shown to increase the breadth and volume of resources available to these actors, the popularity and celebrity of HR practices in an organization may increase the resources allocated to the HR function in those organizations. As resources increase, the power and influence of the HR function increase (Pfeffer, 1997). Research in CEO celebrity has shown that a leader’s reputation may change the reputation of the company (Hayward, Rindova, & Pollock, 2004). First paragraph quotation is taken from the work done by (Pfeffer, 1997) comes in the article in the first part. And the second written in the conclusion part from (Hayward, Rindova, & Pollock, 2004). Both implying the same idea, supporting the conclusion by a repeating quote can affect the strength of the conclusion itself.

How does the article contribute to the field? Does it make an original contribution to the field?

Human resource management has evolved into a strategic business partner linking organization goals to the internal and external customers of the company. This article contributes to the field of Human Resource Management vitally as organizations today are shifting and transforming into a global business and fostering local businesses. The importance to align the strategic goals with the HR efforts remains vital to the success.

How does the article relate to the course?

The course entitled management organizational policy is the study of how organizational strategies are made to run the processes and to make the firm as competitive as possible. This article throws light on Human Resource management’s importance and how it thrived and evolved over the years. The most important asset in any firm today is considered to be the Human Resource and managing it properly is the key to success.

Diagnosing Human Resource Management Practices:

Increasingly, teamwork is seen as one of the main building blocks of successful organizations and much time, effort and resources are being invested in developing and managing cohesive teams (Katzenbach and Smith, 1994) The potential benefits of these investments are numerous and diverse. Perhaps the greatest is the achievement of organizational synergy where the output of the whole team becomes greater than the sum of the individual contributors and in so doing boosts the productivity and creativity of their units and functions. In addition, teamwork can benefit the company and its members in the following ways (Wilson, 1994):

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For many organizations, decentralization and delegation have been central features of their new management philosophy. Current thinking leads to the removal of as many levels as possible in an attempt to rid the organization of bureaucracy. This is expected to provide faster communication both up and down the organization with less chance of distortion. Another benefit of de layering is that individuals and groups can be more autonomous and responsive to customer needs (Wilson, 1994). Within the general policy guidelines of the organization, employees at the customer interface are ’empowered’ to make decisions that previously would have to be referred to higher levels.

Finally, another application of the framework presented in this paper would be to investigate the relative influence of so-called ‘best practices’ on different organizational outcomes. Many of the HRM practices identified in the recent literature seem like fads because they often are implemented without much understanding of the underlying principles of human behavior as well as a tendency to do whatever is popular at the moment, regardless of whether it makes sense in the specific setting or organization (Pfeffer, 1994). It is this trendiness that makes the task of measuring and demonstrating the effective contribution of HR policies and practices of organizations so difficult. Yet, for many line managers, it is the ability to show that HR adds value, not the rhetoric, that forms the basis of policy making and which gives HR its place on company boards. If the HR policies and practices are misaligned, or no attempt is made to provide line managers with a framework to assess practices on an ongoing basis, the credibility and influence of the HR function will suffer. The framework put forward in this article may help to avoid these mistakes.

Linkage between Production and Effective HRM:

The aspect of this model presenting the greatest practical difficulty is in specifying and measuring employee productivity. A couple of factors complicate this task. The one receiving the most attention in the past has been the problem of measuring productivity, and the more fundamental problem concerning the definition of productivity. At the simplest level, productivity can be defined in terms of quantity of output. Quality is also an important aspect of productivity, but it is the quantity definition of productivity that has received the most attention. The practical difficulty is that many measures of productivity (both quantity and particularly quality) are subjective measures, and thus not very amenable to simulation. Blue collar and routine clerical occupations are the ones most amenable to simulations at present, due to the relative simplicity involved in defining and measuring productivity. Due to the difficulty in determining acceptable objective performance measures, many organizations and studies rely upon subjective measures of productivity, but Bommer et al. [13] conclude that the measures are not interchangeable due to the low published correlations between objective and subjective performance measures. In practical terms, this means that the performance measures used by most organizations are useless for the purpose of simulation studies.

The model just illustrated and discussed makes it clear just how complex the human resource aspects of production can be, yet complexity is not a sufficient reason to warrant inclusion in models of production systems. It is only important to include human resources in production system models if biased or deficient conclusions would result from ignoring human resources. The discussion will thus turn to some examples that will highlight the importance of considering carefully the human resource implications of policy decisions. Finally, a brief example of an informal test of the model is discussed. In the example, a post hoc evaluation of an actual example is performed, with simulation results that are consistent with the actual outcome.

Leaders influence on organizational effectiveness:

Most effects of human capital on firm performance are mediated by efficiency and innovative adaptation. Employees with strong skills and motivation are likely to be more productive, because they will do the work faster and smarter. Research shows that talented employees can improve efficiency and process reliability (e.g., Hatch & Dyer, 2004; Ichniowski & Shaw, 1999). Talented employees can also improve adaptation by helping to develop innovative products and services, by marketing them effectively, and by providing excellent customer service (Baer & Frese, 2003; Pfeffer, 1998; Vermeulen, Jong, & O’Shaughnessy, 2005).

Because efficiency and adaptation mediate the effects of human resources and relations on firm performance, the importance of human resources and relations increases when talented, dedicated employees are needed to achieve optimal levels for these other two performance determinants. Human resources are more important when operations are labor intensive, the work is complex and difficult to learn, successful performance requires a high level of skill and experience, and it is difficult to recruit and train competent replacements for people who leave. Examples of organizations likely to have such conditions include hospitals, consulting firms, law firms, advertising agencies, research universities, and companies that rely on advanced manufacturing technology (Snell & Dean, 1992).

Human resources and relations are very important when the competitive strategy requires unique experts or celebrities to attract and retain customers (Grant, 1996; Pennings et al., 1998). If unusually talented employees are dissatisfied, they can often find jobs in competing companies or start their own company. Voluntary turnover of key employees can be important not only for the loss of unique skills, but also for the loss of their special external relationships with clients, suppliers, strategic partners, and others (Dess & Shaw, 2001; Leana & Van Buren, 1999; Pennings et al., 1998). Examples of organizations with high dependence on uniquely talented members include professional sports teams, advertising agencies, talent agencies, consulting companies, and investment banking firms.

Human relations and resources are less important when much of the work can be done by unskilled workers, there are many people who are able and willing to do simple repetitive work for low wages and benefits, and there are few labor laws or other limitations on how employees are treated (as in many third-world countries). Likewise, human resources and relations are less important when an organization needs few employees except for the headquarters staff (e.g., a chemicals company with highly automated processes, an internet services company, or a “virtual organization” for which nearly all functions are outsourced).

Leaders can improve the performance of an organization by influencing the performance determinants. One form of influence is the use of specific leadership behaviors in interactions with subordinates, peers, and outsiders. A second form of influence involves decisions about management programs and systems, and organizational structure. A third form of influence involves decisions about the competitive strategy for the organization. The three forms of influence must be used together in a consistent way for effective strategic leadership.

The Changing Role of HR Managers in Europe:

European HR management appears to be a field in transition; external forces such as increasing demands for quality improvement, privatization and completion of the Single European Market are important influences affecting the nature and scope of HRM across European countries. Competitive pressures have added to the challenges created by the changes in the occupational and demographic make-up of the workforce. What are the implications of these developments for the HR function across Europe?

It is interesting to note that HR and non-HR managers attached a different degree of importance to the various skill and knowledge areas. In particular, HR managers rated organizational change skills, general business management, and knowledge of general Personnel HR techniques significantly higher in importance than non- HR managers. In contrast, non-HR managers attached more importance to consultation skills, improving employee motivation, and working in teams. These differences were most pronounced in the manufacturing sector. In fact, analysis of sector scores showed that respondents from manufacturing companies consistently rated the need for skills to improve employee motivation, teamwork, and cross-cultural communication higher than those employed in the service and public sectors.

These growing demands put the HR manager in a difficult position. If (as the EAPM findings indicated) HR managers are often perceived as too administrative and traditional, line managers may hesitate to allow them to rotate out of the narrow confines of their function into areas where they can gain broader business experience. In addition, what remains unclear is what will happen to the potential role overload and growing expectations on someone in the role of a hardworking HR manager who cannot do all that is required. The senior HR executive in a Swiss company put it candidly: ‘It scares me to think that I might be expected to go out and run a business after twenty years in HR.

I’m afraid I’d fail’.

HRM Practices in small firms:

According to the RBV, human resources (as distinct from human resource activities) are viewed as a potential source of sustained competitive advantage because value, rareness, inimitability and non substitutability is derived from the inherent heterogeneity, ambiguity and complexity of these resources and the conditions under which they are deployed (Wright et al., 1994). Value derives from the unique contribution of skills, knowledge, and cognitive abilities (for example) to achieving firm goals.

Research shows that training is an important HRM issue for many small firms, but formal training is less likely to be provided in these firms (Storey, 2004). Storey and Westhead (1997) provide two explanations for this. First, training is less likely to occur in small firms because of ‘ignorance’ of the benefit it can bring and second because the cost is too high for small firms (Storey, 2004; Storey &Westhead, 1997).

Importance of Corporate image and reputation:

From the perspective of marketing, the impact of corporate image and reputation on consumer behavior is well recognized in spite of the lack of empirical evidence. Numerous authors assert that a good corporate image or reputation helps to increase the firm’s sales and its market share (Shapiro, 1982), and to establish and maintain a loyal relationship with customers (Andreassen and Lindestad, 1998; Robertson, 1993; Yoon et al., 1993).

How is corporate image related to corporate reputation? A review of the past research in the field shows little empirical results except for some general statements. For example, Porter (1985) suggests that a good reputation may help a pioneer “rebuilding an innovative image in the industry, while Franklin (1984) proposes that corporate reputation is a global and final outcome of the process of building a corporate image.

Impact of Human Resource Management on Organizational Performance:

Throughout the 1980s there were a number of variations along this theme of ‘strategic fit’ (Lengnick-Hall and Lengnick-Hall, 1988). One of the clearest expositions and developments of this theme was given by Schuler and Jackson (1987). In their model, HRM is seen as a menu of strategic choices to be made by HR executives intended to promote the most effective role behaviors that are consistent with the organization strategy and are aligned with each other. The model’s starting points are the generic competitive strategies outlined by Porter (1980) – i.e. quality enhancement, innovation and cost leadership or reduction.

For example, Kravetz (1988) conducted a survey of 150 Forbes 500 companies to examine the relationship between ‘Human Resource Progressiveness’ (HRP) and a variety of financial measures drawn from Standard & Poor’s Compustat Services, such as five-year growth in sales, five-year growth in profits, and P-E ratio for the latest twelve months. HRP was measured by asking the vice presidents of human resources of each company in the survey to complete a fifty-one item questionnaire on human resource policies and practices in the areas of communication, management style, career development, performance management, working hours and employee participation.

Finally, it is clear the contribution of even highly skilled and motivated employees will be limited if jobs are programmed or structured in such a way that employees do not get the opportunity to use their skills and abilities to improve their performance. Consequently, HRM practices can also create competitive advantage through provision of organizational structures, leadership and work conditions that encourage initiative and creativity among employees and allow them to find ways to improve how their jobs are performed. Delegation, cross-functional teamwork and participative management are examples of such conditions.

FINAL CONCLUSION

With the increasing demands of today’s business environment, company executives are placing more pressure on the human resource function to perform better, smarter, faster, and cheaper, while providing more value added services. Now, in addition to supporting workforce requirements and general business initiatives, the activities of HR are increasingly focused on managing the broader human capital capabilities required to achieve and sustain a competitive advantage (e.g., succession planning, leadership development, performance management, cultural transformation).In order to accommodate this shift in focus, HR needs to rapidly align their priorities and resources to provide the wider range of expertise necessary.

References:

How leaders influence organizational effectiveness Gary Yukl Management Department, University at Albany, Albany, NY 12222, USA. The Leadership Quarterly 19 (2008) 708-722

Hatch, W. N., & Dyer, H. J. (2004). Human capital and learning as a source of sustainable competitive advantage. Strategic Management Journal, 25, 1155−1178.

Ichniowski, C., & Shaw, K. (1999). The effect of human resource management systems on economic performance: an international comparison of U.S. and Japanese plants. . Management Science, 45(5), 704−721.

Baer, M., & Frese, M. (2003). Innovation is not enough: climates for initiative and psychological safety, process innovations, and firm performance. Journal of Organizational Behavior, 24, 45−68.

Pfeffer, J. (1998). The human equation. Boston: Harvard Business School.

Vermeulen, A. M. P., Jong, D. P. J. J., O, & Shaughnessy, K. C. (2005). Identifying key determinants for new produ