An Analysis Of The Effects Of Selected Human Resource Management Practices On The Corporate Performance

Project and Seminar Material for Human Resource Management (HRM)

Abstract

This research looked at the effects of selected human resource management practices on the corporate performance of Glaxosmithkline, agbara, ogun state, Nigeria. Research over the years, has established significantly a positive correlation between HR practices and organisational performance. The assumption underpinning the practice of HRM is that people are the organisation’s key resource and organisational performance largely depends on them. Therefore, if an appropriate range of HR policies and processes are developed and implemented effectively, HR will make a substantial impact on organisational performance. The objectives of the study were to examines the contribution of consistency among HR practices to corporate performance and seeks to evaluate the combinations of Human Resource Management practices that influence a high performance system in an organization. This study surveyed made use of 150 respondents made up of 40 managerial employees and 110 non-managerial employees. The response rate was 98.66% which represented 40 managerial employees and 108 non-managerial employees. The study employed two sets of 8 and 10 HR practices categorised questionnaires for managers and employees respectively. Purposive and convenience sampling techniques were applied to managers and employees respectively. The findings of the study revealed that Systems of high-performance HR practices will boost productivity andComplementing high-performance HR practices will boost productivity. The study also showed that the enormous benefits of properly managing human resources are achieved in Glaxosmithkline. It was recommended that Glaxosmithkline should maintain good HR department for the proper management of human resources through whom competitive advantage could be created.

Chapter One

General Introduction

Background of the Study

Contemporary organizations are constantly confronting pressures to improve service and productivity. The precariousness of the external working environment and the rapid rate of technological change increasingly demand innovative means of improving business performance and securing competitive advantage. People are the recognized prime determinants of competitive advantage and the need for effective manpower management has become more important than ever before.

The task of effective human resource management in 21st century organizations has gone beyond just the HR unit of the organization alone. The responsibility for exploring the potentials of the people in an organization for maximum performance is now shared between senior managers, HR professionals and line managers. However, the challenges facing today’s organization provides an ideal occasion for the diverse HR practices to prove its ability to contribute towards corporate performance.

HR in organizations of the 21st century is viewed as been a critical component in the maintenance and improvement of corporate performance (Bowen & Ostroff, 2004; Ostroff & Bowen, 2000). HR is assumed to affect knowledge, skills, abilities (Schuler & Jackson, 1995), attitudes and behaviour of employees (Guest, 1997), and may affect the performance of an organisation (Den Hartog, Boselie, & Paauwe, 2004). Research shows that the human element in organisations is an indispensable variable as organizations try to stay ahead of competition. Research further reveals that HR can play a decisive role in organisational performance (Arthur, 1994; Becker & Gerhart, 1996; Boselie, Dietz, & Boon, 2005; Guest, Michie, Conway, & Sheehan, 2003; Wood, 1999; Youndt, Snell, James, & Lepak, 1996).

Two factors have been assumed to be important factors in explaining the link between HR and corporate performance. Baron and Kreps (1999) identified these two factors as:

The alignment of HR with the organisation strategy (strategic fit) and
The alignment of the various HR practices, such as career opportunities, training and appraisal, within the organisation (internal fit)

Baron and Kreps hypothesize that when HR within an organisation is well aligned, and employees know what is expected of them, they will invariably act similarly and have uniform expectations about work and behaviour.

For this purpose of this study, I have adapted Som’s (2006) definition Innovative HR practices. He defined innovative HR practices as any intentional introduction or change of HR program, policy, practice or system designed to influence or adapt employee skills, behaviours, and interactions of employees and have the potential to provide both the foundation for strategy formulation and the means for strategy implementation that is perceived to be new and creates current capabilities and competencies.

Scholars have attempted to recommend designs of various HR systems to achieve organizational goals as well as determine best set of complementing HR practices that will indeed boost performance. However, several limitations spanning from different levels of analysis, size of firm, union status of organizations and business environment has limited the acceptability of several advancements, hence, the need for a contextual study such as this.

Statement of Research Problem

With the increasing significance of the ‘human factor’ in contemporary organizations, HR-issues have become core to organizations that deem people as their most essential advantage in achieving organizational goals. Trend in recent times have shown some considerable level of research concentration on the link between HR and corporate performance.

However, a set of issues deeply in need of more consideration is aimed at the identification of strategic HR practices (Wright & Boswell, 2002). Steadiness in the classification or determination of HR practices is rather low. An evaluation of the universalistic perspective of theorizing the HR-performancelink reveals that much is still to be learnt about the combination of practices that produces high performance work systems. The impression given by Becker and Gerhart (1996) reveal that studies vary greatly as to the practices identified as ‘best’ and sometimes even as to whether a HR practice is likely to be positively or negatively related to high performance.

Little is known about how and through which processes HR practices influences corporate performance (Guest, 1997; Becker, Huselid, Pickus & Spratt, 1997; Ostroff & Bowen, 2000). Intermediate processes that ultimately affect performance outcomes are referred to as the ‘black box’ of the HR-outcome link (e.g. Wright & Gardner, 2003). Unlocking the ‘black box’ means identifying HR-objects that are relevant to corporate performance. This remark is concerned with the explanation of the mechanisms linking HR practices to key aspects of corporate performance i.e. how ‘specific’ bundles of HR practices influence performance. Several authors identified the lack of theoretical models to demystify this shortcoming (Ferris et al., 1998; Guest, 1997; Peccei and Rosenthal, 2001; Truss, 2001). It is however pertinent to give attention not only to traditional financial outcomes but also to intermediate and process-related criteria that show the path towards achieving the financial results (Becker and Gerhart, 1996; Becker and Huselid, 1998).

Research Objectives

This study is aimed at furthering research on the HR-Firm Performance link by providing answers to the identified conceptual flaws.

The study examines the contribution of consistency among HR practices to corporate performance.
This study seeks to evaluate the combinations of Human Resource Management practices that influence a high performance system in an organization.

Significance of the Study

Many scholars have asserted that the human resources of the organization are potentially one of the most potent sources of continuous competitive advantage for organizations and have tried to reveal the positive relationship between HR and corporate performance (Ferris, et al, 1999). Nevertheless, there has been imprecision as to which of the many “high performance” HR practices (Delaney et al., 1989) that have been identified aid better performance (Collins and Smith, 2006; Ferris, et al, 1999).

The results derived from the study will enable HR managers understand the impact of the strategies employed on employee productivity. Many a time top management considers a single approach towards achieving corporate goals, they engage practices that they consider best fit to realizing set targets; however, this study shows that the combination of complementing HR practices can best align employee attitudes and behaviours towards achieving corporate agenda.

Research Questions

The central inquiry in this study is centered on the linkage between HR Practices and Corporate performance as can be explained by the effect of the internal fit on the supportive activities of employees towards their colleagues and employer. However, further specific inquiries are posed below:

What is the relationship between HR practices and corporate performance?
What combinations of HR practices determine a high performance work system?

Research Hypotheses

Using longitudinal data from 30 steel plants, Ichniowski et al (1993), found the impact of ‘cooperative and innovative’ HR practices to have a positive and considerable effect on firm efficiency. Similarly, Arthur (1994) found in 30 steel ‘minimills’ that those with ‘collaborative’ HR systems had lower turnover rates and higher productivity than firms with ‘calculative’ systems whose emphasis is

efficiency and the reduction of labour costs. MacDuffie (1995) found that ‘combinations’ of internally consistent HR practices were linked with greater productivity and quality in 62 automotive plants. Delaney and Huselid (1996) established that the extensive utilization of innovative HR practices have a strong and negative effect on corporate turnover in the manufacturing sector.

Each of these studies has focused on the impact of high performance work practices on employee turnover or productivity. Although a growing empirical literature focuses generally on the impact of High performance work practices, prior work has been limited in terms of the range of practices evaluated. It could thus be hypothesized that:

H1; Systems of high-performance HR practices will not boost productivity.

Baird and Meshoulam (1988) asserted that corporate performance will be improved to the degree that organizations engage HR practices that support one another (the internal fit). Similarly, Osterman (1987) argued that an underlying logic to a firm’s system of HR practices be put in place. He holds that certain HR policies and practices should fit together. Osterman (1994) found that organizations that place high value on employee commitment, for example, are not likely to use term employees rather they are likely to invest in innovative work practices such as skills training and incentive compensation. Huselid (1995) posits that the effectiveness of employee participation systems will be improved if employees are aware of their efforts that will be rewarded and has the tendency to ensure their advancement. Based on these arguments a testable proposition is therefore set out thus:

H2; Complementing high-performance HR practices will not boost productivity.

Research Methodology

Welman & Kruger (1997) describes methodology as the use of diverse methods, techniques and principles to create scientifically based knowledge. It is constrained to objective methods and procedures that are relevant within a particular discipline. The focus of methodology is on exact ways and methods that can be useful to better comprehend the field and scope of study. This study shall engage a non-experimental research design with the use of survey method. The principal advantage of survey studies is that they provide information on large groups of people, with very little effort, and in a cost effective manner. Surveys allow researchers to assess a wider variety of behaviors and other phenomena than can be studied in a typical naturalistic observation study. This study can also be referred to as a correlation study because it tries to determine the relationship between HR practices and corporate performance. Data will be analysed using descriptive statistics, analysis of variance, multiple regression and Pearson’s product-moment correlation coefficient since this study intends to establish a relationship between HR practices and employees performance as well as determine the degree of contribution of independent variables to dependent variables.

Sources of Data

The data collecting method for this study is the questionnaire. This will present us with the primary data required for the research study.

Scope of Study

This study will focus on two indicators of operational performance in the organization – voluntary employee turnover and productivity. High performance HR practices that will be adopted for this study have been categorized as either calculative HR practice or collaborative HR practice. Hence, the practices under study will be limited to training, performance appraisal, career planning, employee participation, job definition, compensation and selection.

1.10. Operationalisation

Operationalisation is the distinction between dependent and independent variables in a research study. The independent variable is the factor that is manipulated or controlled by the researcher. The dependent variable is a measure of the effect (if any) of the independent variable. Most researchers are interested in probing the effects of the independent variable on something, and that something is the dependentvariable (Isaac & Michael, 1997).

Chapter Five

Summary, Conclusion and Recommendation

5.1 Summary

The study examined an analysis of the effects of selected human resource management practices on the corporate performance of Glaxosmithkline, agbara, ogun state, nigeria. Responses from both managerial and non-managerial staff indicate similar and in some cases divergent views on HRM practices of Glaxosmithkline. Though research has established concretely that HRM practices have positive impact on employee productivity leading to improved corporate performance in Glaxosmithkline.

5.2 Conclusion

This research has provided an overview and a discussion of HRM practices of Glaxosmithkline. It chiefly focused on perception of employees on HRM practices, policies and programmes and the impact of such HR practices on organisational performance. The purpose was to critically evaluate the perceptions of employees on HRM practices and establish the impact of properly managing human resources on organisational performance. Seven HR practices, policies and programmes were laid bare before managers and employees for critical scrutiny. This process produced results that indicated that Glaxosmithkline needed to pay much more attention to the proper management of their human resources in order to realise their full potential and create competitive advantage through them.

In a nutshell, this study has been conducted in Glaxosmithkline and concluded that the proper management of human resources has enormous impact on organisational performance. Management of this organization should start to incorporate HRM thinking into business strategies and make the HR function “strategically proactive” Brockbank (1999). The effective management of the human resources of this organization will create and sustain competitive advantage and improve organisational performance. It is imperative for the Glaxosmithkline to ensure that investment in their human resources and HRM practices will attract and retain talented people.

5.3 Recommendations

From all indications, the implementation and the management of human resources by non-HR experts has damaging implications. It was found out that HR functions like recruitment and selection were left in the hands of directors and general managers and this opens the recruitment and selection processes up to nepotism, cronyism and favouritism. Starting with recruitment and selection, it is recommended that people HR expertise with the help of line managers are made to carry out these activities so that people with the appropriate skills, attitudes and knowledge are hired. This will ensure professionalism and institutionalism in the activities of companies.

Training and Development

This research revealed that the „wholesale‟ nature of training and development programmes of rural banks do not permit the full realisation of the benefits of the practice. It is therefore recommended that there should be coherent and strategic training and development that is planned to match both individual and organisational interests. To ensure that training needs identified is realistic and useful, the needs should be discussed with employees. „Wholesale‟ training programmes do not yield the desired results. Also, budgets for training and development should be solely dedicated to such purposes. To reap the full benefits of training and development programmes, adequate monitoring and management of performances of employees should be instituted by management.

Employee Participation and Employment Security

Additionally, employee involvement should be touted the more to get employees to participate more and better in decisions that affect their jobs. Such an environment will automatically create employment security and unveil innovativeness and potentials of employees. Furthermore, providing feedback, counselling and grievance handling avenues will reduce conflicts and tension.

This research also revealed that employee participation is not a common practice with Glaxosmithkline. The research also established that the strict, rigid and unbending kind of environment employees find themselves in limits employee voice and affects employment security. It is thus recommended that in order to bring out the best in employees, sanctions should not be attached to initiatives and employees‟ contributions should be regarded as important and taken in good faith. HR managers should understand team dynamics and find ways to bring disparate personalities together and make it a point to encourage team work and team spirit.

Compensation and Rewards

Furthermore, the research revealed that there is an overwhelming support for pay for performance from both employees and managers. It is recommended that management should endeavour to link pay to performance. This type of compensation structure is known to ensure fairness, eliminate conflicts and tension and propel employees to higher performance.

Career Planning

The research findings show that management of Glaxosmithkline do not have so much interest in the career development of employees. Career planning is made the sole responsibility of employees. The researcher recommends that a career development plan that focuses on the employees‟ needs for growth and development are instituted. Organisations can provide the assistance that will give the employee the opportunity to grow his or her career.

Again, it is recommended that employees are made aware of potential positions for promotions. Management must also base promotions on performance.

Appraisal and Performance Management

It was found out from the study that performance appraisal is largely a formality and a yearly affair and when it does happen, feedback is neither properly nor regularly given to employees. Performance management on the other hand was non-existent.

Research has shown the positive effect of 360 degree form of appraising in directly improving performance. This form of appraisal help employees to build their own self awareness of their strengths, weaknesses and development needs. It is therefore recommended that rural banks adopt this form of appraising and encourage managers to give regular, constructive and descriptive feedback. Feedback should describe what employees are doing well, be clear about what they might improve or change and why. Performance appraisal simply, is all about individuals and their managers having regular, quality conversations.

For performance management to work, it is recommended that focus is directed on the results that the rural banks are aiming to achieve and a recognition that the individual employees need to engage with those aims. Research has also shown that engaged staff are far more likely to be productive, committed and innovative than those that are not. Underperformance should be managed in such a way that it does not create tension and conflict or demoralise and discourage the employee from reforming.

Finally, performance improvement is not only a result of well functioning system but also depends on effective human resource strategies that succeed in recruiting and maintaining a committed and motivated workforce (Al-Ahmadi, 2009). The research found that there is nothing like HR strategy let alone to talk of linking it with business strategy. It is imperative for rural banks to go beyond the talk and paper work and get on executing these HR functions properly to bring the desired impact on organisational performance.

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