Value of High-Performance Work Systems in Strategic Human Resource Management - Assignment Example

343704 - Strategic Management of the Human Resources 1. Define and evaluate the value of high performance work systems as a form of SHRM: Human Resource: In the world that is dominated by competitive economy, the strength of any company , is highly influenced by the quality of the product and in the capacity to rapidly adopt to the changing environment. So it becomes obvious that to survive in this condition , the main resource to be relied upon is the people – employee’s of the firm or exactly on qualities on them as creativity , ingenuity , problem solving ability etc. In an attempt to achieve this, the firm provides workers with information skills, incentives , the responsibility to take decisions indispensable for new innovations, improvement in quality and rapid adaptation to change. These approaches are defined as the High Performance Work System of the organization. It has become the order of the day , with the turn of the century, a growing number of organizations are viewing ,human resources as a unpreventable source and base for their competitive advantage. Of relentless studies done, the fact is strongly established that ,high competencies are obtained on the competitive edge by the high quotient of employee skills, distinctive organizational cultures, management processes and systems, entirely changing the scenario , where traditionally transferable resources such as equipment where considered to be asset . Now it has been well understood by the organizations that competitive advantage could be only obtained with the backing of high quality workforce that enables organizations to compete on front , on the basis of market responsiveness, product and service quality, differentiated products and technological innovation. SHRM: In this light, Strategic human resource management (SHRM) has been defined as ‘ the linking of human resources with strategic goals and objectives in order to improve business performance and develop organizational culture that foster innovation and flexibility ‘. The Strategic HR is a newly coined term, that on simple term delivers the meaning that ,it is accepting of the HR function as a strategic partner in the formulation of the company’s strategies. In broader sense it also means the implementation of those framed company’s strategies through HR activities such as recruiting, selecting, training and rewarding personnel etc. HPWS: In this High Performance Work System is the name given to the form of organization that is frequently seen as most appropriate for contemporary conditions. The HPWS aims at obtaining greater levels of involvement and skill development for all employees regardless of their function or level in the organization they posess. Other labels for this include high- commitment management, high involvement management, flexible production systems or simply transformed or innovative work systems. Attributes of HPWS: The High Performance Work System (HPWS) is generally characterized by a set of managerial practices that serve to enhance the involvement, commitment and competencies of the employee. The core practices involve changing the way jobs are designed and executed. For example, it might entail methods for working flexibly, functional flexibility (the training of people to do a range of jobs), enhancing team working, maintenance of quality circles, and organizing suggestion schemes. A set of practices are used to guarantee that employees have the knowledge and the competences to do their jobs under the high performance system. This can be achieved by incorporating training in team working and sharpening the inter-personal skills, team briefing, appraisal and information sharing. A set of practices aimed at ensuring that the organization attracts and retains people with the right motivations to work under such a system. These include job security guarantees, attitude surveys with feedback to employees, a high priority given to internal recruitment, and the use of systematic selection methods. In the pay system, the extent to which reward systems that link pay to performance are required is an open question. Individual-based pay systems , when analyzed as an option is on one hand , is a potential disruptive force of team’s working, but, on the other hand, if it is well designed and preplanned , can focus on the employees key performance criteria. The imbibing of systems that are linked to organizational or group performance may sound more appropriate, but again, there is little evidence to suggest that profit-sharing and employee share-ownership schemes could increase organizational identification. Introduction of Knowledge based pay, the pay that is based on the acquisition of skills might emerge out as the system that dovetails best with high performance practice, but here again , there is a strong case for relying on high flat salaries to ensure that pay is not a source of conflict. Part of the initial thrust for increased employee involvement was the realization that people were not strongly motivated by marginal increments in their pay. The satisfactions involved in doing rewarding work were important. This recognition of the intrinsic motivation of people led to a concern for the quality of working life and to redesign jobs so that they are more demanding and involved. Summing this point it could be taken for sure that , HPWS is unlikely to work unless employees have considerable variation in their tasks and possess an control over how and when they do them. Though the above point is valid, high performance practices have been shown to have impact even when jobs remain highly fragmented and low skilled. Much Japanese management falls in to this category: job rotation, group working and quality circles are often implemented into assembly line situations. In the terms of one UK manager in car manufacturing this involves a new role obligation: that ‘the employee should have two jobs, one to make the product, the other to think of better ways of making it’. HPWS can work in synergy with other management methods such as Total Quality Management (TQM) and Lean Production and is found to enhance their effectiveness. On contrary investing in the new quality management procedures associated with TQM without some use of high performance practices is unlikely to pay-off. Evaluating the HPWS: Naturally, the HPWS should be judged by whether employees display certain role behaviors, i.e. the employees who are highly flexible, pro-active and constant source of innovation etc can be considered as the best available human resource. But even if the possess these skills, it becomes essential to whether it reflects their being more committed, involved and satisfied with the concern. Ultimately the HPWS must be judged by whether it produces the high performance that its title suggests it should. Though the routine conventional indictors that show the effect of HPWS are profit, productivity, costs and human resource measures such as labor turnover, the real gauge of the system is whether it fosters innovations that enhance the quality of products, service delivery and processes. This becomes important, as these in turn affect the profits and productivity and these rates of change other conventional measures that are important. In nut shell, successful utilization of the HPWS should end in enlarged the intellectual capital that is the true intangible asset of the organization. Majority of the academic research has concentrated on assessing the impact of HPWS on the key outcomes as the productivity, profits, labor turnover and absenteeism. Unluckily, the results that were obtained were generally uneven across studies and, within individual studies, were varied, across performance measures. As an example to quote the variation on dependability of HPWS effect, there is no rigid promise that in uncertain situations or where management is following a high-innovation strategy, what would be its effects. It also stands unclear in that many of the studies that have found positive associations cannot be bifurcated as , whether these reflect synergistic relations between practices, i.e., whether the whole is greater than the sum of the parts, nor it becomes a point where we cannot tell that whether certain specific practices are crucial or if the decisive factor is management’s general orientation towards employee involvement and development, rather than the practices followed per se. Though many above fluctuations are there , till date , nonetheless, with but a single exception, no study reports have shown an negative association of HPWS being with organizational performance. Whereas it can be quoted that, there is sufficient evidence to link superior performance to the key practices associated with HPWS that underlines the need for further investment in further research in this area. This worthwhile project would need a larger scale of investments than that so far. It can be safely said that until the results of such an endeavor are available it is likely to come to a strong conclusion as whether, there is an approach or set of practices that can truly justify the high performance , associated with its title. Thus a high-performance company shouldn't be difficult to spot. Success in general is characterised largely by outputs. These concerns likely achieve sustained and increasing market share, and delivers greater added value, profitability or shareholder value. It innovates, or differentiates its service from that of its competitors and its customers return time and again. In short, it is likely to outperform others in its sector in one way or another. 2. Evaluate how can the case of SAB be evaluated from an organizational development perspective? To what extent has the South African Breweries strategic framework been managed as a planned program of change? “It is not the strongest species that survives, nor the most intelligent, but the most responsive to change”. -Charles Darwin Not alone for the prospect of survival of the species, “The Survival of the fittest “is very important key in the success of an organization too. The case that is dealt here is around the challenge of developing a global reigning business from a base, the South African. South African Breweries is one of the companies that dominate in the sector of beer production and distribution. Apart from being undisputed leader in Africa, it has a rapid growing presence in Europe and Asia also. South African Breweries had to combat and overcome both the challenge of global expansion and the development of a talented local work force , in coping up with the changing legal and social environment in South Africa. This the company overcame by initiating and instuting a series of programs to deal the challenges. The South African Breweries was founded Jacob Letterstedt in the year 1895 , with sole aim of serving and tapping the new market of miners and prospectors who were in and around Johannesburg. Very shortly, in a short span of two years, it became the first industrial company to be listed in the Johannesburg Stock Exchange (JSE). Since than it has grown and outgrown to be the dominant player on the exchange. By the year of 2002, the company merged with Miller Brewing Company, thus emerging as the world's second largest brewery existing with the name SABMiller. The company has now measured soaring heights of success now due to careful planning done at various level, that helped the concern to adapt and manage the change in culture, environment, converting the abrupt changes in the surroundings into planned change in the growth of the company. This can be understood by analyzing the growth of the company through years under various pressures. In the year of 1955, the Government of South Africa introduced a heavy tax on beer products that lead to many consumers switching over to spirits. But this knock blown by the South African government on the beer industry proved to be a blessing in disguise for SAB. In that crisis when all the beer producers tried to shut down or sell their company owing to the pressure of decreased demand on beer , exactly on a year after the introduction of the policy, the company purchased its two main competitors. After this acquisitions the new and larger SAB was in a high position of rationalizing operations there by reducing the costs and increasing the profitability. By this farsighted approach , it could be seen that the plan was a success the fact that with in 1998, SAB commanded a 98 per cent share of the South African beer market and was considered one of the lowest cost producers of beer in the world stands as a testimony. The business during 1980’s had been held back by apartheid and international sanctions that forced the company to pull out of some markets. In that testing time the company shifted its focus inward and had concenterated on growth in the home market, building new breweries and expanding distribution capacity. But by the end of the 1980s these political constraints were disappearing, then company started to think globally again and   the board was able to refocus on aggressive growth strategies.Tthe company underwent a reappraisal of SAB's direction, structure and management capabilities for the next phase of development, successfully trying to identify its positive and negative points. From 1990 to 1998, was the period HR director Johan Nel as Water shed time in the performance management. The time when the concept of human resource as main investment of the company started emerging, the company to move forward invited Mac group , a US consultancy to review its strategic process , in the year 1990 . Then came the implementation of IMP Integrated Management Process, a mile stone in HR. The IMP began value workshop involving 6000 employees from all level, resulting in ten key values. This workshop aimed at crossing the hurdle of then existing crisis, identified, customer service, and quality, commitment to the enviroment, respect and equlity of opportunity, health and safety and employee development as key values. This helped them to set a strategic plan for advancement in all sectors as Business planning, communication and performance managements. This facilitated the alignment of the goal of individuals and company’s that helped them to react quickly to changes and brought the company through the next phase. The then existed Business idea of SAB shows their planned management of change that helps the company to steer forward. These Business Idea that has been schematically shown, highlights the key focus areas , underlying the concept of how SAB can systematically enhance its competitiveness in the eyes of its customers, consumers and other key stakeholders. The process as explained is self-reinforcing and self-generative ,it is this subtle and powerful combination of elements that lead SAB to success , rather than any one element on its own. The success is the result of systemic change undergone by the company. For this success to be sustainable, it is bound to stand strong on the key success factors , which is the company’s investment , i.e. growth, people and corporate reputation (image). These themes could be better understood by the simple strategic picture, consisting of four core (primary chain) strategies. Diagram 2: The Core and support strategies. The Core Strategies The Marketing Strategy Development of new product Positioning of Brand Export quantities The Manufacturing Strategy Better operating practice Work design done with team based practices Anchorage core competence Manufacturing f the systems – the information technology - IT The Sales and Distribution Strategy Management of Segmented channel Strategic out-sourcing to 3rd parties as owner-drivers and other distributors) IT Management of the Environment Strategy Main External issues as . legislation Commercial equities Effectiveness of Organization Equity The Supporting Strategies The Human Resources Support Strategy The Finance Support Strategy The IT Support Strategy The Technical Support Strategy The Planning Support Strategy In 1991 the company set forward its vision to be one of the top five breweries in the world by the year 2000 "while behaving in a progressive and socially responsible manner". This was possible as the core business values that would make this possible has already been asserted ,a s people, growth and reputation. Jobs were initially redesigned in 1992-93, bringing in a four-tier team structure. Then the teams were made self-sufficient in operating machinery, problem-solving, quality control and maintenance, and there was to be a new focus on "accountability at source". New skills and attitudes were required, and training focused on technical skills, problem-solving, teamworking (including setting goals and dealing with conflict) and quality issues, such as waste management. In 1997 , as to take the next giant leap the company decided to assert its path by comparing with another company. The company and union undertook a joint study tour. They visited Volkswagen in Germany, Miller Trenton brewery in the US and Cadbury-Schweppes in the UK to invesigate flexible working, multiskilling and its effect on staffing levels, and what was required to bring about the higher levels of skill needed to crive the business forward. Following this a innovative scheme , Project Noah introduced to shoot the then existing trouble of employee : job management- the idea of retrenchment and business incubator. Thus as the fact that, major investment in learning and development to support changes in SAB has been done , shows its meticulous plan to adjust to changes. In the words of Nel, "There will be no deviating from the kind of intensity and focus we give to people, because we belive it has been platform of our success over many years," he insists. "In fact, we are likely to increase, rather than decrease, our activity and intent in terms of people management, both locally and from an international perspective. This could explain that from the organizational Development perspective , the company by carefully , implementing Strategic frame works , has seen the mission of the SAB to be accomplished by converting environmental changes as a ladder through its careful planned management of change. For the SAB , the turnover had increased by a compound rate of 17 per cent per year, and the earnings had also grown up by value of 18 per cent per year. Sab has spread its wings with brewing operations spread to 19 countries and a total annual capacity of nearly 43 million hectoliters. Now the SAB is the fourth largest brewing group in the world , also it is the third largest conglomerate in South Africa next only to De Beers and Anglo American. In 2002 was born SAB Miller on combination with the Miller Brewing . 3. How would you advice the brewery to ensure that it can evaluate the value added of its SHRM approach? The field of Human resource has been rapidly developed , to assist companies to adapt to quickly changing environment and competitive labor market. Off late new perspective in this field has started as Strategic human resource management (SHRM ) , that sees human resource as a business partner. The SHRM and its impact on different organization is the hot debate in the HR field with only less research available on this field. The researches are done in various countries analyzing the impacts on their organization . some examples of human resource analysis and performance as , “The Impact of Strategic Human Resource Architecture on Organizations' Productivity : The Case of Leading Joint-Stock Companies in Lithuania “ Motivating Employee-Owners in ESOP Firms: Human Resource Policies and Company performance Future Human Resources Development in British Columbia's Offshore Oil & Gas Industry: Preliminary analysis NADRA Cuts Costs, Streamlines HR Management, and Improves performance analysis Project Mega Grid: performance Collection and analysis in Large Clusters United States Navy Consolidates Human Resource Support With Remedy The impact of strategic integration and development on HR practices on firm performance : some evidences from Australia To deal as example , “ The Impact of Strategic Human Resource Architecture on Organizations' Productivity, The Case of Leading Joint-Stock Companies in Lithuania “and “The impact of strategic integration and development on HR practices on firm performance : some evidences from Australia “can be seen . In the Lithunia stock company , the effect of the SHRM approach on the company was evaluated using certain parameters. The effect of resource practices that is included in the strategic human resource as internal career opportunities, formal training system , result oriented appraisal, employment security, voice mechanism , job description and profit sharing in terms of productivity measures of organization as sales per employee , profit per employee ratio’s etc. The study revealed that internal career opportunities had positive impact whereas voice mechanism and employment security had a negative impact on sales per employee, whereas no impact of SHR was seen in profit per employee. The methodology followed can be adapted for the brewery. Hypothesis that could show the effect of SHRM on the company has to be conceived. As in here , positive relation between SHR practice and sales per employee Then in methodology, interview with the manager’s and HR experts could help us understand the situation and select the factor that could influence the organizations behavior. Then would be gathering data through a questionnaire as internal carrier opportunities, training, result oriented appraisal etc. Then response bias check can be done to remove biased results. A regression analysis can be done to check each variable. Thus a study can be undertaken in the brewery to ascertain the impact of SHRM on the value addition of the Brewery. Bibliography 1. Stephen Wood , 2001, High Performance Work System, http://esrccoi.group.shef.ac.uk/pdf/whatis/high_performance.pdf 2. "Bass Ginsber and South African Breweries," Business China, September 1, 1997. 3. High Performance Work Research Project Managerial practices,1996-2007 International Labour Organization (ILO) http://www.oit.org/public/english/employment/skills/workplace/case/topi_3.htm#2 4. Vilma Midvertye and erika sirutye. Riga, 2004,The impact of SHRM on organisation’s productivity : a case of leading joint stock companies in lithuania . http://www2.sseriga.edu.lv/library/working_papers/FT_2004_11.pdf 5. Kai .k .anderson , Brain . K .Cooper and Cherrie Jihua Jhu , 2005, The impact of strategic integration and development on HR practices on firm performance : some evidences from Australia, http://www.buseco.monash.edu.au/mgt/research/working-papers/2005/wp53-05.pdf Read More