Do High Performance Work Systems Help Organisational Performance?
Now more than ever, in today’s constantly-changing, intensely competitive business world, there is an increasing demand on firms to design innovative, new ways of getting a competitive advantage over their rivals in the marketplace. Although conventional methods such as Michael Porter’s (1985) three generic strategies – cost leadership, differentiation, and focus – continue to form the basis of how many firms seek to achieve a competitive advantage contemporarily, an increasingly popular tactic employed by businesses is the implementation of high performance work systems (HPWSs) (HPWSs). However, whether or not a correlation between HPWSs and increased organisational performance does in fact exist in reality remains up to discussion. Thus, by drawing upon a number of empirical examples, this essay will analyse the extent to which HPWSs offer an easy road to increased organisational performance. In order to accomplish so in a logical manner, this essay will use the following format. To begin with, this essay will establish, for the avoidance of doubt, what HPWSs are and explain how organisational performance is measured. Only until these theoretical foundations have been created will it analyse the relationship between HPWSs and firm performance through the use of actual investigations. Ultimately, this essay will firmly agree with the premise that HPWSs offer an easy road to increased organisational performance, based on a number of pieces of research. Firstly, Kling’s (1995) review investigating the influence of three high performance work practises (HPWPs) – training, alternative pay schemes, and employee involvement in decision-making – on labour productivity. Secondly, Sung and Ashton’s (2005) survey evaluating the extent to which businesses use HPWSs; thirdly, Combs et al.’s (2006) meta-analysis; and finally, Huselid’s (1995) research demonstrating the benefits of HPWSs in terms of both financial and HR-related outcomes. That is not to suggest, however, that this essay will overlook the counterargument, that the assumption is untrue. On the contrary, it too will be addressed in the main body, through reference to Ramsay et al.’s (2000) scepticism over how this so-called causal relationship gets to exist in the first place and Godard’s (2004) contrast between HPWSs and traditional personnel practises. Essay writing services of Academic Master is providing help to world wide people in their works for increasing performance. For the interests of definitional clarity, this essay will, firstly, define high performance work systems. In this context, it is vital to realise that, as is common in scholarly writing, HPWSs is a controversial concept - that is, there is no universally agreed upon definition of HPWSs. Rather, what there are is a series of competing definitions put up by different scholars through time. For example, Belt and Giles (2009) define HPWSs as “a broad approach to managing organisations that attempt to promote more effective employee involvement and commitment in order to attain high levels of performance. They are designed to boost the discretionary effort people put into their work, and to fully utilise the skills that they possess” (Belt and Giles, 2009: 3). (Belt and Giles, 2009: 3). Based on this description alone, it is evident that autonomy has a vital part to play in the notion of HPWSs as it is via an increase in autonomy that employee empowerment is promoted, the entailment of which, hopefully for an organisation’s sake, will be greater organisational performance. Alternatively, Wei and Lau (2010) believes that HPWSs “represent a systematic and integrated method of managing human resources toward the alignment of HR activities and the achievement of business strategy” (Wei and Lau, 2010: 1487). (Wei and Lau, 2010: 1487). More specifically, Godard (2004) deconstructs the concept further, referring to HPWSs as a ‘high-performance paradigm’. Godard’s paradigm rests around the idea that HPWSs are formed from both alternative working practises and high-commitment employment practises (Godard, 2004). (Godard, 2004). Thus, to summarise it is evident that there are a lot of alternative conceptualisations of HPWSs. Nonetheless, the different conceptualisations that do exist happen to contain similar undertones. From these, we are able to determine that HPWSs are, in essence, systems that contain sets of management practises which are aimed to increase organisational performance by establishing an atmosphere in which people are active to a larger level and allocated additional responsibility.
Prior to this essay’s discussion on the relationship between HPWSs and organisational performance, it is helpful to understand how the latter is measured. To that aim, Guest (1997) argues that it is more practical to characterise organisational performance in terms of ‘outcomes’ as the latter is more effectively able to capture the wide variety of dependent variables, such as work satisfaction, that are represented in studies (Guest, 1997: 266). (Guest, 1997: 266). Henceforth, therefore, the terms performance and outcomes shall be used interchangeably throughout this essay. According to Paauwe’s (2009) tripartite classification, based from Dyer and Reeves (1995), performance results of HRM can be separated into financial outcomes, organisational outcomes, and HR-related outcomes (Paauwe, 2009: 135). (Paauwe, 2009: 135). Financial outcomes are monetary-related and so comprise, for example, an organisation’s market share, profitability, and sales (Paauwe, 2009: 135). (Paauwe, 2009: 135). Organisational outcomes, by contrast, refer to metrics of production in an organisation. Thus, particular examples are productivity, quality and efficiency (Paauwe, 2009: 135). (Paauwe, 2009: 135). Finally, HR-related outcomes are focussed on the employees. That is, they emphasise on levels of job satisfaction and dedication (Paauwe, 2009: 135). (Paauwe, 2009: 135). Some of these metrics of organisational performance will be of special relevance in the next debate.
One of the most important pieces of empirical research which corroborates the notion that HPWSs offer an easy path to greater organisational performance stems from a study done by Kling (1995). (1995). The aims of the investigation were dual. Firstly, it was aimed to study the impact of three distinct high performance work practises (HPWPs) – training, alternative pay systems, and employee involvement in decision-making – on organisational success as measured by labour productivity. Secondly, it was aimed to look into HPWSs in which such techniques were brought in at the same time. The research findings generated striking outcomes. More specifically, with regards to the effects of training on labour productivity, it was found that, in a study of 155 manufacturing firms in the United States, those organisations that implemented a formal training programme “experienced a 19 percent larger rise in productivity on average over the next 3 years than firms that did not introduce a training programme” (Kling, 1995: 30). (Kling, 1995: 30). Furthermore, with relation to the benefits of profit sharing on productivity, a study of 112 manufacturing firms indicated that “defect and downtime rates plummeted 23 percent apiece in the first year after the strategy was introduced” (Kling, 1995: 30). (Kling, 1995: 30). Meanwhile, as concerns the effects of employee involvement in decision-making on productivity, “of the 29 studies reviewed, 14 indicated that workplace participation has a positive effect on productivity, only 2 indicated negative effects, and in the remainder the effects were inconclusive” (Kling, 1995: 32). (Kling, 1995: 32). Thus, regardless of the work practises tested, the results unanimously demonstrate a positive association between HPWSs and organisational performance as evaluated by labour productivity. Indeed, this is confirmed by a survey of Fortune 1000 companies – a list of the 1,000 largest American companies – which found that 60 percent of those, “using at least one practise that increased the responsibility of employees in the business, reported that these practises increased productivity and 70 percent reported that they improved quality” (Kling, 1995: 29). (Kling, 1995: 29). That being said, Kling (1995) also contends that these good impacts are more broadly felt when a collaborative approach to implementation is chosen, rather than when each component is put into practise independently. In other words, these favourable impacts are said to be “mutually reinforcing” (Kling, 1995: 30). (Kling, 1995: 30).
Similarly, Sung and Ashton’s (2005) survey further substantiates the argument that HPWSs offer a simple way to increased organisational performance. They conducted a study of 294 firms over a five-month period in 2004 in an attempt to comprehend not only the extent to which companies apply high performance work practises (HPWPs) – that is, “a set of complementary work practises covering three broad categories: high employee involvement practises, human resource practises, and reward and commitment practises” (Sung and Ashton, 2005: 5) – but also the benefits of doing so. High employee participation practises are ones which increase the level of autonomy offered to a workforce. Self-governed teams provide simply one example of such methods in action (Sung and Ashton, 2005: 6). (Sung and Ashton, 2005: 6).