HPW Management High Performance Work Systems

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HPW Management High Performance Work Systems

This report is based on how an organization can implement and put on practices the High Performance Work Systems with the objective of encourage and improve the performance of their employees in order to achieve the organization goals. The aim of the research is to demonstrate the following: contribute to the implementation of appropriate HR policies that maximize the contribution of people to organizational objectives, Good practice in a range of high performance workplace practices, Change management issues related to the implementation of high performance work practices.

The employees are assets to the company, and therefore they must be managed efficiently in order to achieve the goals and objectives in the company. Through research the lacking of the company has been identified that are currently causing problems, and lowering performance of the employees. The report focuses on seven key aspects: Employment Security, Careful Recruitment, Teamwork and decentralization, high pay with an incentive element, extensive training, communication, and narrow status differentials. These factors are rated as low with only two being satisfactory. Therefore there exist a lot of problems in the current policies and procedures. These have to be changed to implement the practices of HPW. Through the finding in these specific areas, using structured interviews, recommendations are made. These include, better policy making in the areas of introducing incentives and rewards for all employees, better communication tools, improving employee engagement and reducing differences between the employee statuses.

All employees must be aware of the organizational goals, and therefore there must be better communication. New tools, are to be introduced that will allow every employee at all levels to be more accessible, and also have the opportunity to take part in decision making, by contributing new and innovative ideas, in the project of their interest. The report recommends, peer pressure through teamwork rather than authoritative pressure to improve performance. Furthermore, new forms of improving teamwork with team building, decentralization of processes by improving employee engagement, better training for new skills, stronger and more effective induction, are recommended to improve upon the problems being faced.

The report concluded with an initial action plan to address the more pressing and important issues. The action plan takes the recommendations and lists the factors involved in implementation. The action plan, once implemented will allow the performance of the company to be en route to be improved, the policies will become more acceptable to the employees, encouraging them to work harder and more efficiently, ultimately benefiting the company and making it more profitable.

Contents

INTRODUCTION

The High Performance Work Systems (HPW) is a strategy that the organizations use to engage their employees. According to Gephardt and Van Buren (1996) Companies organize workflow around key business processes and often create teams to carry out those processes, that include a number of human resource policies such as hiring, training, performance management, and compensation intended to enhance employee skills, knowledge, motivation and flexibility.

Moreover the HPW is a general approach to managing organizations that aims to stimulate more effective employee involvement and commitment in order to achieve high levels of performance… designed to enhance the discretionary effort employees put into their work, and to fully utilize the skills that they possess. (Belt and Giles: 2009)

The current situation at the company is that of a very low performance and work spirits. Despite attempts made by the Human Resource (HR) department in the past, most of the policies put forward and the attempts are increasing performance has not been effective. These policies will have to be replaced In lieu of a new attempt to introduce a new system, one such system being the High Performance Work System. The aim of this report is to know all the details about this issue and put in practice the right policies and action plan that solve this issues currently being faced at managing the people and achieving the organization goals.

Furthermore the implementation of High Performance Work Systems like a Human Resources initiative can provide information, develop diagnostic and make specific interventions at workplace level. The High Performance Work Systems is a perspective that contributes to set up the issues relating to organizational performance and increase the high commitment management of the employees, that is a benefits for the organization.

Also, the High Performance Work Systems practices can increase the employees’ satisfaction. According to Patterson (1997) there exists a link between the use of these practices and the higher levels of job satisfaction, and Applebaum et al (2000) argued that HPW has giving autonomy over task-level, decision making, membership of self-directed production and off-liner teams, and communication with people outside the work group are associated with workers trusting their managers more and experiencing intrinsic rewards.

LITERATURE REVIEW

Contemporary literature on management and work organization has paid considerable attention to the way that certain human resource practices can improve the performance of individual employees and the organizations employing them. There is a variety of terminology used to describe innovative workplace human resource management (HRM) practices, including “best practice” HRM, ‘high commitment’ or high involvement management.

Also others adopt HPWP (high-performance work practice) because it is evident from previous research that organizations do not necessarily all adopt these practices with an underpinning coherent management approach or philosophy. High performance work practices are not radical “new practices”, they are simply work practices that can be deliberately introduced in order to improve organizational performance.

We can find another terminology HPWO (High Performance Work Organizations), this provide more efficient ways of organizing human labor as well as offering the prospect of extending learning opportunities to all their employees.

High performance organizations link people, strategy and performance to arrive at success (Becker, Huselid & Ulrich 2001). High performance organizations are promoted on the assumption that they can achieve higher flexibility and better quality of products while remaining cost efficient and competitive. Their attractiveness lies in their potential to provide higher benefits for employers as well as employees-higher productivity for employers and higher wages and higher job satisfaction for employees (Bauer 2004).

Belt and Giles (2009) define high performance working as a general approach to managing organizations that aims to stimulate more effective employee involvement and commitment to achieve high levels of performance.

The HPW is presented as an alternative to traditional tailored management systems which were based on hierarchical organisations in which managers exercised centralized control over workers, who were given little discretion and treated as passive inputs to the production process. By shifting from a system of management based on notions of controlling workers to one focused instead on eliciting higher levels of commitment (Walton: 1985)

Gephardt and Van Buren (1996) argued that a high performance work system achieves synergy when it produces two outcomes simultaneously: all of the organizational parts are aligned and fit together and people in the company are deeply committed, energized, and impassioned about their work. Also, a high performance work system should not be equated with its components, such as self-managing work teams, employee involvement, or total quality management. A true high performance work system aligns a complex set of organizational elements including: strategy, vision, mission, and goals, beliefs and values; management practices; organizational structure; work practices and processes; human resource system; and other system: such as technology.

Mkamwa (2009) reviewed the widely used terminologies surrounding HPW systems and confirmed that there is no universally agreed meaning for the term “high performance work system”, “due to its wide and varied usage”. Despite this, he argues that it can be described as a “specific combination of human resource management practices, work structures and processes which maximize employee knowledge, skills, commitment and flexibility”. The concept crucially incorporates practices that increase the empowerment of employees and enhance the skills and incentives that enable and motivate them to take advantage of this greater empowerment. Moreover, it affords employees an opportunity for participation in substantive decisions, encourages development of worker skills, and provides them with incentives to participate in making decisions.

Different labels have been used to refer to (or are contained within) the HPW framework. Commonly used terms include:

High-Commitment Employment Practices – Practices that affect employee commitment, which is, in turn, assumed to influence organizational performance (e.g. sophisticated selection and training, behaviour-based appraisal and advancement criteria, contingent pay systems, group bonuses and profit sharing).

High-Involvement Work Practices – Practices that emphasize an orientation towards enlarging employees‟ skills and knowledge through more intensive commitment to and interaction within the workplace (e.g. team-working/self-managed teams, information sharing and flexible job designs).

Alternative Work Practices – Participatory practices that constitute alternative job designs, or allow employees some freedom to design their work (e.g. work teams, job enrichment, job rotation, quality circles or problem-solving groups, cross training, and training in problem solving).

Innovative Work Practices/Workplace Innovations – Practices that enhance discretionary behaviour among employees and thus lead to innovative work behaviour in the workplace (e.g. cross-training, flexible job designs, training in problem solving, decentralized decision-making, self-managed teams). (Mkwama, 2009).

We can find some research about HPW that support the idea or improve the performance of the organizations. For instance, the European Foundation for the Improvement of Living and working conditions made a research based on secondary data analysis of Eurofound’s recent European Company Survey (ECS) 2009. It explored the links between a broad range of workplace practices and sustainable organizational performance, building on the survey report. The report develops a theoretical and analytical framework against which questions from the ECS are mapped and then subjected to a range of multivariate analyses. The framework used to explain the link between high-performance work practice (HPWP) and organizational performance is based on the ability, motivation and opportunity (AMO) model. It proposes that HPWPs achieve their results by increasing employees’ discretionary effort.

Also, The UK Commission for Employment and Skills developed a survey. The concept of skills utilization encompasses a range of high performance work practices with a focus on creating a working environment in which employee talents can be deployed for the optimal mutual benefit of themselves and their employer. As such it implies a particular concern with identification of workforce talents, designing work in such a way that employee talents are optimally used and offering opportunities for employees to contribute to shaping the broader development of the organization beyond the confines of their job descriptions.

METHODOLOGY

The HR department, in order to gauge the acceptance levels of policies within the employees at the organization, conducted interviews with them, which focused on two Issues of strong interest: the low performances problems inside the organization and how the employees perceive the effectiveness of HPW policies and practices. For the study, ten employees were selected from different departments of the organization (at least one per department) with the objective of have a general view of this practice. We were aware that the opinions and concerns were general among the majority of the employees, therefore the sample size chosen is adequate and not to overwhelming for analysis.

The aim of these structured interviews was to find the common problems based on several key issues and analyze them to find possible solutions based on HPW system. Therefore these seven policies were chosen:

Employment security

Pfeffer (1998) regards employment security as fundamentally underpinning the other six HR practices, principally because it is regarded as unrealistic to ask employees to offer their ideas, hard work and commitment without some expectation of employment security and concern for their future careers. The contribution a positive psychological contract makes to open and trusting employment relationships (Holman et al 2003), and the notion of mutuality that is seen as a key component in partnership agreements both relate to this.

The most significant point about including employment security as one of the high commitment HR practices is that it asserts that job reductions will be avoided wherever possible, and that employees should expect to maintain their employment with the organization – if appropriate through internal transfers.

Employment security can be enhanced by well-devised and forward-looking systems of human resource planning and an understanding of how organisations may be structured to achieve flexibility. It is perhaps best summed up by the view that workers should be treated not as a variable cost but as a critical asset in the long-term viability and success of the organization.

Teamwork and decentralization

Teamwork is typically seen as leading to better decision making and the achievement of more creative solutions (Pfeffer 1998, p76). Evidence suggests that employees who work in teams generally report higher levels of satisfaction than their counterparts working under more ‘traditional’ regimes, although they also report working hard as well (Wilkinson et al 1997; Edwards and Wright 1998; Geary and Dobbins 2001; Batt and Doellgast 2003).

For team working to be successful workers require information in order to provide a basis from which to offer their suggestions and contribute to improvements in organizational performance.

Careful recruitment

The recruitment process is one of the most fundamental value added HR Processes. The recruitment is especially critical for managers in the organization. The managers use the recruitment process intensively, and satisfaction with Human Resources is mostly about the satisfaction with the recruitment process.

Recruiting and retaining outstanding people and ‘capturing a stock of exceptional human talent’ (Boxall 1996, p66-67) is seen as an effective way to achieve sustained competitive advantage. Even though employers have always wanted to recruit the best people available, this is nowadays more likely to be systematized through the use of sophisticated selection techniques and taking greater care when hiring. Increasingly, employers are looking for applicants who possess a range of social, interpersonal and team working skills in addition to technical ability.

Recruiting high quality, committed staff is seen as central to ‘best practice’ HRM, and the use of psychometric tests, structured interviews and work sampling is likely to increase the validity of selection decisions. Competencies to be sought at the selection stage include trainability, flexibility, commitment, drive and persistence, and initiative. The key point about ‘best practice’ selection is that it should be integrated and systematic, making use of the techniques which are appropriate for the position and the organization, and administered by individuals who have themselves been trained.

Extensive training

Training primarily reflects the ability dimension of the model by enabling employees to acquire the skills they need to meet the demands of a more participatory work environment. Human capital theory is often used to explain theoretical links between training and performance. Human capital refers to the ‘aggregate knowledge, skills, abilities and other characteristics’ (Van Iddekinge et al., 2009) of employees and identifies these as a major factor in understanding firm performance.

Human capital can either be generic or firm-specific, the former referring to the general abilities of employees in terms of education and cognitive ability and the latter to skills and abilities that are learned within and applicable to particular firm contexts (Van Iddekinge et al., 2009). Where human capital is ‘firm-specific’ and cannot easily be transferred outside a firm or imitated, it can become a source of competitive advantage. Formal training is one way a firm can improve its stock of human capital, particularly firm-specific human capital (the other key method being recruitment practices) (Hatch and Dyer, 2004; Van Iddekinge et al., 2009).

Extensive training is noted as a key aspect of HPWP (Birdi et al., 2008). Whitfield (2000) identifies a number of ways in which training might support HPWP. Greater worker involvement and participation might require workers to be trained to think holistically about their work process.

High pay with an incentive element

Along with motivation, pay may also contribute to ability through the recruitment and retention of skilled staff through base pay levels. When recruiting, firms adopting HPWP may find they need to offer a high level of pay to attract the most skilled workers (Way, 2002). Similarly, Guthrie (2001) argues that firms introducing HPWP may need to pay above market wages to retain staff that have received training and are accustomed to the demands of working in a high-performance environment. Firms that introduce HPWP but that are unable to keep labor turnover low tend to find that HPWP has a detrimental effect on productivity. There are a range of systems that have been used to link pay to performance in an effort to motivate employees, notably individual performance-related pay, group performance-related pay and forms of financial participation including employee share-ownership and profit-sharing (Appelbaum et al., 2000; Kessler, 2010).

Individual performance-related pay involves linking pay to the performance of individual workers. Depending on the context, ‘performance’ may be defined purely on numerical output or it may include some measure of quality. A number of authors have suggested that individual performance-related pay may reduce trust and discourage cooperation if employees compete to achieve higher levels of pay (Appelbaum et al., 2000; Pendleton, 2006). Additionally, Belfield and Marsden (2003) note that a key issue with performance-related pay is handling the monitoring of performance.

Communication

The communication is one of the most fundamental value added HR Processes. It is essential for the understanding of the organization and the communication between employers and employees can provide ideas for ways to improve products, services or work processes. Communication process can take place either through employee representatives, including unions, or, more directly, through small groups or individual dialogue between managers and employees.

Open communications about financial performance, strategy and operational matters not only ensures workers are informed about organizational issues, it also conveys a symbolic and substantive message that they are to be trusted and treated in an open and positive manner. Also, the participation can provide management with some legitimacy for its actions on the grounds that ideas have been put forward by workers and/or at least considered by them before decisions are ultimately made.

Narrow status differentials.

It is important the reduction of status differences between employees and look forward a way to encourage employees to offer ideas within an ‘open’ management culture.

Extending employee share ownership to the workforce as a whole is a further way in which status differences can be reduced, typically through schemes whereby staffs are allocated shares according to some predetermined formula. Pfeffer (1998, p38) argues that ’employee ownership, effectively implemented, can align the interests of employees with those of shareholders by making employees shareholders too’. Firms with high shareholder returns also often have some form of employee ownership.

Interview Questions:

How do you see your future in this organization?

How would you describe your employment security in this company?

Do you see your future career goals accessible and achievable in this organization?

Are you committed to achievable in this organization?

Are the staffs in your department and in the organization highly skilled and effective in their role in the organization?

Are the selection processes and the inductions conducted enough to screen and prepare the right candidate for the right positions?

Do you think that the organization has preference for internal candidates in the selection process?

What is your experience of working in teams?

Do you think that peer pressure is more likely to generate better performance than supervisory control?

Is team working automatically ‘positive’ in your view?

How much time has been devoted to training in your organization and do you think it is has been sufficient and worthwhile?

Have you been training for new tasks?

What is the proportion of the workforce who has access to company incentive schemes?

What kinds of appraisals are used to determine their compensation?

What would be the pay receive for Individual performance?

What is the percent of Employee representation in the decision making?

Do you know and understand the objectives of the organization?

Have you receive an invitation for sharing your ideas about a new process?

What do you think about removing status differences between separate categories of workers?

Have you been rewarded for your performance?

Do you think that is necessary implement a family-friendly policy?

RESULTS

The responses to these questions were recorded and analyzed to give an understanding of the state of these key factors within the organization. From the analysis each of the factors were given a rating of either “LOW”, “SATISFACTORY” or “EXCELLENT”, based on judging the responses received and the overall statements made. Each response was classed as either positive or negative and the overall results were tallied on 10 (total number of respondents).

Employment Security: “LOW”

Figure : Employment Security (Higher is better)

The employment security was deemed low among the employees because they do not see a clear future in the organization with the potential for satisfactory advancement policies in place, and employee commitment to achieving their careers goals.

Careful recruitment: “SATISFACTORY”

Figure : Careful Recruitment (Higher is better)

The processes in the current recruitment process are satisfactory. Each of the different factors is well received, and the skills and effectiveness of the employees are positively scored. There remains however grounds for improvement, especially in internal recruitment.

Team Working and Decentralization: “LOW”

Figure : Team work and decentralization

Team work and decentralization has been scored low in the research. This is mainly because of a lack of peer pressure as high supervisory pressure. Overall there is a lack of positivity in the teams bringing the experience down.

Extensive Training: “SATISFACTORY”

Figure : Extensive Training

Extensive training time for the employees are highly positive, this is due to the training that is regularly provided, with strong support. However the effectiveness of these training is not rated highly and therefore is not being efficient. Training for new tasks is also low.

High pay with an incentive element: “LOW”

Figure : Incentive elements and high pay

Incentives are only available at certain departments such as sales. Therefore it is rated low in the entire organization. Additionally the employees failed to grasp the rewards for individual performance, and appraisals for compensations are not well received.

Communication: “LOW”

Figure : Communication

The communication in the organization is rated low. The overall alignment to the company’s objectives is very low, as anything below 100% is not effective. Furthermore, employee representation and participation is low.

Narrow status differentials: “LOW”

Figure : Narrow Status Differentials

The company’s policies have not been effective at reducing status differentials within the organization. The policies for family friendliness is very low, as well as the status difference between the employees. Fairness of reward policies although generally well received is not good enough.

CONCLUSION

The organization is in need for a change of Human Resource policies for improving overall performance. From the research about High Performance Work Systems it has become apparent that the methods can make the required changes to achieve this. Human Resource is the main asset of the company that needs to be managed properly to allow for higher profits and organizational efficiency.

A review was conducted using the main factors, using structured interviews among the employees to gain an understanding of the issues currently affecting the employees. The results of this, after analysis, showed that there exist several problems throughout the seven different key factors, mainly in: employment security, careful recruitment, teamwork and decentralization, high pay with an incentive element, extensive training, communication and narrow status differentials. Five among these were found to be low, while only 2 to be of satisfactory level. It goes without saying that all of these require comprehensive improvements by making policy changes that directly address the issues.

A list of recommendations have been created, that focus on the findings, with an action plan that takes into account all of the factors and allows for better management of the human assets that are present in the company. These changes, although might not be drastic, can improve many of the important issues within the organization, and help improve performance in all aspects.

Overall the aim of this report was to investigate the most important problems within the company in terms of managing its human resource. Identification and recommendations of these being the ultimate outcome.

RECOMENDATIONS

From the research conducted and results obtained thus far, several recommendations are to be made to address specifically the issues that are causing low performance within the organization and improve management of the employees. These recommendations are listed below. Additionally, an action plan has also been included.

New policies are required that allow the employees in different positions within the organization to have a clear path towards a better future in the company. This should include promotions, accessibility to better positions, thereby improving commitments.

The skills present in the organization are excellent, and therefore further efforts must be made to proper induction and new policies for internal recruitment, giving it a better priority.

Team work must be encouraged, with more engagement of employees and opportunities for all, in presenting their ideas in new projects. This will improve the overall positivity and also introduce peer pressure rather than authoritative pressure, which is more effective.

Moving away from a centralized decision making is important, this will allow for larger idea pools and also improve employee involvement.

Trainings policies must be improved to allow for better training of employees for new skills, based on their plan within the organization. The training sessions must also be made innovative, such as an employee’s retrieve that can allow for more effective mediums of delivery.

Newer incentives must be introduced throughout the company and improvement in compensations schemes must be made to boost the morals and introduce a healthy competition. When possible, pay increments must also be made periodically to keep up with the market.

The employees are an asset with their expertise and opinions, towards the common responsibility and commitment towards the organization. Therefore better representation must be introduced that allow for this to be practiced. Communication of the organizational goals must reach all, and keep everyone in line and updated.

All policies made within the organization must be considered, keeping in mind to be more family friendly. All such policies must not increase the gap between employee statuses within the organization to a level that causes unsatisfactory results. All the current employees in higher official roles must be briefed about having a more hands on approach and better direct communication. They also must be accessible and present during key events involving all employees of all levels.