Best Practice as a Human Resource Strategy - Case Study Example

Introduction Best practice as a human resource and development strategy attempts to link two issues i.e. human resource strategies and competitive advantage. This perspective is founded on the belief that human resource and development strategies can cause employees to become committed and highly motivated towards their organisation. Consequently, such employees are expected to contribute towards improvement of the company's performance. Reward systems form a critical part of best practice policy because they still fall under human resource strategies. The organisation to be examined is John Lewis Partnership. This company is a worker co-op. It is one of the most exemplary companies when it comes to implementation of best practice strategies. This is because all the employees within the organisation are part owners of the organisation. The organisation focuses on addressing all their needs whether in the reward section or elsewhere. On the other hand, the employees pay back these efforts through commitment and best performance. Best practice has formed one of the organisation's key strengths. Strategic capability and degree of sophistication of the strategic Human resource and development effort John Lewis partnership has made sure that training is part of its human resource and development efforts. This is because it realises the value of this best practice strategy. Pfeffer and Velga (1999) explain the importance of training and development of skills within any organisation. A company that takes its employees through training solidifies their contribution to the company. This is because such employees get equipped with the ability to make decisions in their work. On top of this, such employees have high levels of initiative and will try their utmost best to improve their organisational contribution. Skill development is a characteristic part of the John Lewis Partnership because employees who feel the need to improve their skills are given opportunities to do so through training schemes. Youndt et al (1996) emphasise that training is one of the most fundamental aspects of best practice models. However, these same authors also add that training should be integrated into other development activities like staffing, job rotation and others. They claim that no amount of training will contribute towards organisational development if employees are not granted the permission to practice those acquired skills. This means that an organisation should try its best to grant work autonomy to its employees and to empower them through training. John Lewis has achieved this very well. In other retail companies, line managers are given minimal responsibilities. Most of them are expected to consult with higher authorities in order to decide on issues. However, the company under study has eliminated that problem by training those members of staff (so that they can have necessary skills) and then allowing them to make independent decisions. They believe that this is a form of investment into human capital since most of these employees feel valued. According to the Classical and Human relations approach, an organisation's structure and operation are affected by certain situational factors such as technology, size and environment. However best practice advocates like Burnes (2000) came up with a contingency theory. He believes that a reward system within any company can affect the way it operates or how it is structured. Pfeffer (1994) believes that best practice companies should have a structure that places staff members into groups. Those groups should be such that they have the ability to make their own decisions. Another aspect of best practise firms is that they ought to have reward systems that are compact in nature. This implies that there should be minimal differences between different members of staff so that most employees within the organisation operate in a relatively independent manner with the ability to make their own decisions. John Lewis' strategic capability in this aspect of structure is demonstrated by the division of the company into departments. These departments work together to achieve gaols and have been granted relative autonomy. One can consider them as teams. Also, the company gives almost equal rewards to all members of the teams. One can therefore conclude that the company's structure is a clear depiction of its best practise strategy. (Pfeffer, 1994) Why and whether human resource strategy is seen as adding value Best practice strategies have definitely added value to the organisation. This is because the approach has motivated performance within the organisation. According to the Equity and expectancy theories (main components of the best practice model) put forward by Adam (1965). It can be seen that there are two aspects in motivation. The first is the input made by an employee and the second is outcome which normally comes from the respective organisation. The ratio between these two aspects needs to be equal otherwise employees will loose motivation to perform. This is where the term negative inequity stems from. Here, an employee's input is not matched to outcome from the organisation. There is a need for justice to be administered in this area otherwise employees will lack motivation. Hertzberg (2001) came up with a two factor model to illustrate the importance of performance motivation as part of best practice strategy. He asserted that factors causing job satisfaction were quite different from those ones causing job dissatisfaction. He places more emphasis on factors that cause job satisfaction such as the nature of work, responsibilities in the workplace and recognition of achievement. This is something that is quite different from simply increasing salaries. Pay can be considered as a factor that can cause job dissatisfaction and should be dealt with so as to have time to concentrate on other important aspects. This is the reason why John Lewis does not simply increase employees' salaries. It appreciates achievement and places more emphasis on the latter rather than the former. This is the reason why its best practice strategies have added value to the company. John Lewis realised that payments simply alter behaviour but do not change the attitudes causing these behaviours as stated by Kohn (1993). Kohn (1993) and Pfeffer (1998) solidify this stand point by adding that the financial aspect is not the only thing that matters. This is because the absence of it could be taken as a form of punishment by the organisation. This is the reason why John Lewis uses its aspect of partnership to motivate employees rather than just focusing on financial issues. These same authors assert that if a company only focuses on this type of approach, it may prevent employees from tapping their full potential. John Lewis realised this and this is why the partnership adds other factors into the equation. For example, employees within the organisation have the power to hire or fire leaders within their council upon giving justification of their reasons for doing so. Employees in the Company also have the freedom to air out their grievances and misgivings about some of their administrators. Such approaches move away form the financial aspect of motivation and consequently add value to the firm. Kohn (1993) adds that it is possible to motivate employees without the need to increase their pay. He claims there are three C's that employees can add to their organisation in order to add value. These include Choice; where an employee should be given the opportunity to participate in decisions affecting the company. This is an aspect that John Lewis has perfected through voting power granted to its employees. Also, that they have an internal magazine where suggestions on governance are given and the administration reciprocates. The second C is the issue of Collaboration. Here there should be a two-way exchange of information between the company and the employees. The third C put forward by the same author is Content where organisations should go out of out their way to enrich employees' jobs. This is an aspect that John Lewis has also incorporated into their management style since employees work in teams, line managers have considerable amounts of responsibility and yet there are always new technical issues faced John Lewis. All these qualities deal with the content aspect of motivation thus adding value top the company. Pfeffer (1998) asserts that employees can add value to an organisation when there is equity within the organisation. Any given company should realise that an employee will only be motivated when they receive appreciation for their efforts. This appreciation should be equal among all members of the organisation. Most organisations have made the mistake of sharing profits among managers and top administrators yet this is quite a big misconception. All members of the organisation should receive equal treatment in this area because it will be a justifiable issue. Al members within the organisation will feel just as importance as the he other and it will strengthen the bond within the organisation. John Lewis has recognised this truth. It has given a lot of emphasis on equality. In the year 2007, the Company distributed fifty five million pounds fairly and equally among all members of staff. Relationship between Human Resource and development activities and the strategic imperatives facing the company One of the most crucial aspects of human resource and development activities within the organization under study is reward systems. Reward systems have a direct and fundamental link between strategic imperatives facing the Company and overall effectiveness achieved by the company. This is because pay systems can be modified so as to align themselves with overall goals and objectives of the organisation consequently becoming part of the businesses strategy within the organisation. It is important for companies to have business strategies first. This is because business strategies provide a guideline that will help a given organisation have a sense of direction. Business strategy defines the way the firm will operate and what level of performance should be expected. Therefore, business strategy is the foundation for rewards systems within the best practice model. The best practice model is such that reward systems should encourage involvement by employees. This implies that the best practice model is against job-based approaches where employees are paid according to their merits. Instead, it advocates for pay systems that are based on skill and rewards and bonuses are given to employees when the company has achieved success. Therefore the best practice model moves away from the traditional methods of measuring employee performance through performance appraisals. More focus is placed on creating a sense of concern within the employees about the performance of the organisation. Also pay systems are dependent on the nature of business success mad not on the merits employees have. Pfeffer (1998) points out some disadvantages of the traditional reward systems where merits were the most important aspect at that time. These are; The merit system creates fear culture within the organisation employees mainly focus on short rather than long term goals employees do not care about how the organisation performs it devalues team work because emphasis is on individual performance it is subject to biases and politics In light of these disadvantages, it became necessary to adopt a reward system that addresses these pitfalls. One should take note that best practice policies remain stagnant even when the organisation's strategic direction changes. Some of the theoretical frameworks contained in this model were spearheaded by Huselid (1995) and Pfeffer (1996). The best practice model is such that a company that adopts this form of practice attract the best human resource personnel there is out there. This implies that the strategy the company adopted will be influenced greatly by these valuable staff members and thus leading to organisational success. One can therefore conclude that policies within this type of strategy precede business strategy. The main relationship between best practice and an organisation's strategic imperatives is that it provides a basis for achieving an organisation's pay objectives. Lawler (1996) states that an organisation first needs to identify its reward system objectives. This is because the objectives act as a basis for measuring the effectiveness of the pay systems and they also act as guidelines. Some of the objectives are; 'Objectives of reward systems Attract and retain employees; Motivate performance; Promote skill and knowledge development; Contribute to corporate culture; Reinforce and define structure; and Determine pay costs' (Lawler, 1996) These objectives have contributed greatly towards achievement of John Lewis Strategic intent. These shall be examined in detail. The first link between the latter mentioned acts is attraction and retention of employees. For the organisation under study; John Lewis, there is a need to attract best quality individuals because the retail sector is highly competitive. This is highly relevant since there are instances when labour markets become stringent. Pfeffer (1998) suggests that there is a link between what amount a firm pays to its workforce and the quality of employees it is able to attract. This theory is seen clearly in the John Lewis partnership where the company paid millions in bonuses to its workforce. This caused an increase in the company's performance as seen from its favourable market shares. Huselid (1995) adds that attracting the right employees is not just something that is achieved by a pay system. It is also something that needs to be combined with a meticulous selection process. The organisation needs to ensure that thee are well qualified candidates in large numbers. the importance of the selection process is that a candidate may feel honoured to belong to an organisation that takes its selection process seriously. This can be carried further to imply that the organisation also values people and this means that those employees will feel privileged to belong to the organisation. This is exactly what has occurred at John Lewis Company. Delery and Doty (1996) assert that whenever there is a low employee turnover, employees will feel more obliged to perform because they are assured of their job security. They highlight the importance of knowing that one will not loose their job. This is because it will. prevent them from worrying about this and instead focus on tasks at hand. Pfeffer (1994) goes on to add that low employee turnover is quite necessary when trying to create a family friendly culture within an organisation. This means that workers will feel at home in their work environment. They will also be challenged intellectually and consequently enjoy their work experience. This is also toped up by a good reward system. John Lewis is characterised by such practices since it has a rigorous selection process, high employee retention and a strong organisational culture. Contribution Human resource and development can make towards achieving the organisation's strategic intent Best practice as a human resource development strategy can help an organisation achieve its strategic intent through creation of a unique corporate culture. Drennan (1992) describes corporate culture as the way things are done within any organisation. It can either impede or promote organisational effectiveness depending on its implementation. John Lewis partnership should ensure that it promotes organisational effectiveness through the following ways. It should try as much as possible to reinforce its value in areas such as innovation, quality, performance and teamwork as suggested by Armstrong (1999). Lawler (1996) adds that an organisation can create a culture through best practise approaches by encouraging the following; -participation -innovation -entrepreneurship -eliminating too much bureaucracy -encouraging competency Lawler (1996) goes on to add that organisations should deal with two aspects in order to change their corporate culture and to achieve their strategic intent. This can be done through communication and the decision making process. John Lewis should make sure that it continues to maintain open and transparent channels of communication about its reward systems. This will eliminate any uncertainties among members of staff and will contribute towards their commitment. The Company should also go out of its way to maintain a participative approach in decision making. Lawler (1995) notes that companies that have failed in the past are those ones that adopted autocratic methods of governance; these are characterised by secrecy and top down communications. The Company should stick to these best practice principles in order to achieve their strategic intent. Conclusion Best practise is a human resource strategy that affects overall organisational strategy. According to the best practice approach, reward systems contribute to organisational culture. However, pay should not be the only thing that takes precedence. There should be adequate consideration of decision making powers, communication channels and job enrichment. If these latter three factors are implemented by companies, then they will achieve competitive advantage. The John Lewis has been on the frontline of best practise strategies because it is a worker and most of their decisions are participative. Reward systems within this company encourage equity and this is why it has been recorded increased profits in the recent years. Reference: John Lewis (2007): Interim Financial report. Retrieved 24 March, 2008 from: http://www.johnlewispartnership.co.uk/Display.aspx'&MasterId=b794db7d-4648-44e4-a931-81228f1340fa&NavigationId=576 Pfeffer, J. and Velga, J. (1999): Putting people first for organizational success; Academy of Management Executive, 13 (2), p. 37-48 Youndt, M. A. et al (1996): Human Resource Management, Manufacturing Strategy, and Firm Performance; Academy of Management Journal, 39, p836-66 Pfeffer, J. (1998): Six Dangerous Myths About Pay; Harvard Business Review, May- June, p. 109-119 Pfeffer, J. (1994): Competitive Advantage Through People: Unleashing the Power of the Workforce, Boston, MA: Stanford Graduate School of Business; Harvard Business School Press Burnes, B. (2000): Managing Change: A Strategic Approach to Organisational Dynamcis, Harlow: Financial Times; Prentice Hall Adams, J. (1965): Inequity in Social Exchange. In Advances in Experimental Social Psychology, vol. 2, ed. L. Berkowitz, p. 267-299; New York: Academic Press. Herzberg, F. (2001): One More Time: How Do You Motivate Employees' Harvard Business Review, 81(3), p. 87-96 Huselid, M. (1995): The Impact of Human Resource Management Practices on Turnover, Productivity and Corporate Financial Performance; Academy of Management Journal, 38 (3), p. 635-72 Kohn, A. (1993): Rethinking Rewards; Harvard Business Review, 71(6), p. 48-49. Lawler, E. (1996): The Design of Effective Reward Systems. In Motivation and Leadership at Work, sixth edition, eds. R. Steers, L. Porter and G.Bigley, p. 527-550. New York; McGraw Hill International Press Delery, J. and Doty, D. (1996): Models of Theorizing in Strategic Human Resource Management: Tests of Universalistic, Contingency and Configurational Performance Predictions; Academy of Management Journal, 39(4), p802-35 Armstrong, M. (1999): Employee Reward. 2ndedition. London: CIPD Lawler, E. (1995): The New Pay: A Strategic Approach; Compensation and Benefits Review, 27 (4), p.14-22 Read More