Value Initiatives Improving Performance in the Workplace

Table of Contents

ABSTRACT

LIST OF TABLES

Chapter 1 – TOPIC
Introduction
Historical Perspective
Purpose of this Study
Problem Statement
Significance of this Study
Research Hypothesis
Limitations
Assumptions
Conceptual Framework
Definition of Terms
Summary

Chapter 2 – REVIEW OF RELATED REFERENCES
Introduction
Literature Review:
Effective Human Resource Management Facilitates
Sustainable Competitive Advantage
Knowledge and Competency Sustaining
Performance
Capability Possession Key to Competitive
Advantage
Employee Development and Sustainable
Performance
High Workplace Attitudes Affect Workplace
Performance and Market Value
Racial Diversity and Organizational
Performance
Summary

Chapter 3 - METHODOLOGY
Introduction
Data Source
Sample Design
Data Collection
Measurement of Variables
Data Analysis
Summary

Chapter 4 - ANALYSIS
Introduction
Descriptive Statistics
Organizational and Market Performance Regression
Analysis
Summary

Chapter 5 - SUMMARY
Introduction
Conclusions
Discussion
Recommendations

REFERENCES

APPENDIX

ABSTRACT

Contemporary research has shown that human capital is one of the most important resources an organization can manage. Human capital, when utilized effectively and efficiently, is a rare and inimitable resource that an organization can utilize to build sustainable competitive advantage. In today’s hyper-competitive world, sustainable competitive advantages are becoming more and more difficult to come by.

Thanks to globalization, fueled by technological advancement, new and exciting opportunities have surfaced for businesses. National boundaries and cultural barriers have become less and less a barrier to market entry in today’s economy. However, in the same token, globalization has opened the door to new threats. Competitors now surface not from companies operating under similar external and internal environments, in close proximity of one another, but from all four corners of the globe. For this reason, utilizing an organization’s most valuable resource, their employees, as effectively and efficiently as possible is of the utmost importance.

Traditional human resource practices and procedures are becoming less and less effective, in this rapidly changing environment that organizations now must operate in. Building and strengthening business by utilizing strategic human resource systems are now becoming the call of the day. Included in this evolvement is the realization that improving individual capacities has a significant effect on increasing and improving workplace productivity.

This study specifically investigates the relationship between certain value initiatives, human resource practices and sustained organizational performance. It is surmised that by implementing value initiatives such as training, job enrichment and internal labor development organizations can improve individual actions and therefore help improve and sustain organizational performance. To this end, a secondary data analysis was conducted utilizing the National Organizations Survey of 1996-1997, utilizing a multiple regression analysis was completed.

This study shows that improvement in sustaining performance could be of value to organizations. The value initiatives training, job enrichment and internal labor market development were demonstrated as opportunities that human resource professionals could implement to assist them in improving and sustaining their organizational performance.

LIST OF TABLES

1-1 Significant Historical Events in the Evolution of HRM Practices

1-2 The Evolving Role of HR Management

2-1 New Versus Old Paradigms in Human Resource Management as Demonstrated by Levi Strauss Corporation

2-2 The Three Dimensions of People Strategy Questionnaire

3-1 Minnesota Center for Survey Research Interview Attempt esults

3-2 Study Variables with Coding and Recoding Information

3-3 Summary of Computed Variables

3-4 Valid Percentage of Organizational Performance and Market Performance Measures (%)

3-5 Correlations for Relevant Variables in NOS Data

3-6 Skewness and Kurtosis of Relevant Variables

4-1 Organizational and Market Performance, Value Initiatives, and Human Resource Practices Description

4-2 Perceived Organizational Performance Regressed on Relevant Variables

4-3 Perceived Market Performance Regressed on Relevant Variables

4-4 Perceived Organizational Performance Regressed on Relevant Variables and Interactions

Value Initiatives Improving Performance in the Workplace

Chapter 1 TOPIC

Introduction

Today’s hyper-competitive world necessitates that businesses continuously take strategic actions to sustain highly competitive performance. It is these actions, which lead to the competitive advantages that seal a company’s fate. Without even a small competitive advantage on their side, businesses are doomed to stumble and eventually be left along the wayside of their industry.

A globalized economy has opened new doors of opportunity for organizations; that is certain. Customers can now be solicited around the globe. Thanks to technology, communication that once took days, if not weeks, to transact now can be accomplished instantaneously. Geographic and cultural boundaries have begun to become invisible as a world economy develops. However, just as there are new opportunities to be taken advantage of, new threats have arisen as well.

Intensified competition is now experienced by most organizations. Not so long ago, a business could have a competitive advantage simply secured by geographic location alone. Today, the dissolution of commerce borders has equated to competitors destroying that tenuous advantage. In addition to the loss of advantage, organizations are now faced with competing with businesses operating under often completely foreign internal and external environments. Yet, with effective, sustainable competitive advantages on their side, businesses can find themselves leapfrogging over their competition to positions of industry leadership, despite these new challenges.

One of the most effective areas of gaining sustainable competitive advantage is attracting and developing knowledgeable and talented team members (Pfeffer, 1994: Youndt, 1998) With the improvement in efficacy and efficiency of the actions of individuals within the company, value then grows from this improved quality of each of these organizational member’s actions. With this in mind, there are logical implications that often differ greatly from today’s business practices.

In the rapidly changing environment that organizations now must operate in, traditional human resources approaches have become of less value. Strategic human resource systems are now receiving renewed attention, as a means of building and strengthening business (Chiavenato, 2001). Human resources have become increasingly important in today’s organizational strategies, especially in the improvement of individual competencies. Although there is a variety of ways an organization can pursue sustainable competitive advantage, this paper will frame its discussion within the context of Human Resource Management (HRM) strategies, in the form of value initiatives directed at the improvement of individual performance.

In this context, value initiatives are only a positive addition to an organization’s strategic arsenal, when they improve the performance of the individual members. They are worth the effort only when they enrich individual actions. It follows that the practical way to measure the success of values initiatives is to determine: To what extent they improve operations? Do they produce better products? Promote faster service? Expand staff capacity? Do they add flexibility and focus to the organization? How do they specifically enhance the use of time, machinery, and capital?

Yet, there is much debate in the Human Resources arena on how these value initiatives of improving individual competency, such as training, job enrichment, and hiring from within the company are linked to organizational performance. An understanding will be shown that each employee’s actions are truly paramount to a company’s success. With the implementation of initiatives that effectively and efficiently promote this belief, organizations can secure a competitive advantage no matter what industry they are in.

Historical Perspective

Human resource management has evolved in line with the evolution of business (Miles & Snow, 1984, Prescott, 1998). Prior to industrialization, business took form as a craft system, with a master craftsman hiring and supervising apprentices as his business warranted. As the Industrial Revolution took hold in nineteenth century America, machines were introduced increasing productivity, as well as the number of employees an enterprise would have in their employ.

‘Personnel management’, as it was once was known, began in the early 1900s. The job tasks were primarily clerical at the beginning, hiring workers and managing the burgeoning record keeping tasks of the ever-expanding industrialization in the United States. The Industrial Revolution brought about dramatic increases in the workforce at organizations, coupled with the need to stave of unionization, as well as incorporating the surge of workers immigrating to America. As business itself changed, the tasks of Human Resource professionals became not only more formalized, but more specialized as well.

By understanding this evolution, one can better understand the contemporary HRM practices in place today, and the significance of its work to a business’ success. Table 1-1 gives a summary of significant events that have helped mold HRM practices over the course of the last two centuries (Sherman, Bohlander & Snell, 1996). This table highlights the significant issues that have promoted the profession’s evolution.

Studies in the first part of the 20th century, such as the Hawthorne studies that showed how fatigue and productivity were altered with the number of hours worked, periods of rest given, and lighting in the workplace (Burtt, 1942), were of critical importance to the evolvement of the human resource profession. It was these studies that stripped away the mechanistic view of the industrial worker and promoted humanistic reforms.

Communication and sensitivity arose as significant motivational tools for managers to utilize in increasing the productivity of their workforce. This was the beginning of the quest to further understand human behavior, which would lead to the development of individual competencies to facilitate the achievement of organizational objectives via change management (Rush, 1969).

Table 1-1

Significant Historical Events in the Evolution of HRM Practices

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Table 1-1 (Continued)

Significant Historical Events in the Evolution of HRM Practices

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By the 1940s, personnel departments began to have specialized staff trained in the tasks performed by early human resource professionals (Adair, 1984). Welfare secretaries were one of the first specialized employees in the arena, charged with monitoring the welfare of employees. Their duties eventually increased as new laws were developed regarding employee and employer rights. As the number of tasks became too cumbersome for one person to handle, the position was further subdivided into categories such as: payroll, hiring, training, contract administration, and union negotiation. Eventually, these departmentalized areas of personnel would exemplify the three major functions of HR professionals today: advisory, service and control.

Beginning in the 1960s, new government regulations and special interest groups further changes the role of the personnel department, propelling them into the position as an integral part of the management team. Equal opportunity for women and other minority groups were demanded of corporations. Consumers and shareholders felt an increasing need for corporate social responsibility. New government regulations brought forth stringent reporting requirements, all hinging on the actions and decision of the personnel department. Top executives turned control of meeting changing affirmative action and equal opportunity regulations, while still meeting the needs of consumer social responsibility, over to the personnel department, enhancing their pivotal role in the organization’s success.

A significant milestone in the furthering of human resource’s credibility was the development of the Human Resource Certification Institute (HRCI), providing a national certification program for HR professionals (Sunoo & Laabs, 1999). One year after their formation, HRCI offered two certifications: Professional in Human Resources (PHR) and Senior Professional in Human Resources (SPHR). These certifications led to the U.S. Department of Labor’s eventual recognition of Human Resources as an occupation in and of itself.

The Society for Human Resource Management (SHRM), originally founded as the American Society of Personnel Administration in 1948, further established credibility for the HR profession. With more than 165,000 members worldwide, SHRM has worked diligently to build the strategic partnership HR has with their organizations, in addition to developing human resources professional skills. Table 1-2 demonstrates how the role of Human Resources has evolved and how this evolvement has contributed directly to the organization’s bottom line (Rothwell, 1998).

It was in the 1980s that there was a shift in thinking regarding human capital management. Personnel were no longer seen as merely cogs in the organizational machine, but as resources to be cultured, nurtured and built upon. Downsizing of personnel, as organizational charts were slenderized, became a critical issue, as was the replacement of people by technology. Yet, in the some capacities, labor shortages made the recruitment and retaining of talent one of the most difficult challenges into the 1990s (Prescott, 1998).

Table 1-2

The Evolving Role of HR Management

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Table 1-2 (Continued)

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Purpose of this Study

There have been positive links found between human resource management practices and how organizations perform. In 1996, Delaney and Huselid found that these practices had significant effect on organizational performance, by utilizing data retrieved from National Organizations Survey, 1991.

The purpose of this study is to augment the understanding of how human resource management impacts organizational performance, in particular, how the actions of individual personnel can sustain organizational performance, as facilitated by human resource management practices. Data from National Organizations Survey (NOS) 1996-1997 was utilized to test how these HRM practices affected organizational performance.

Problem Statement

Less than a generation ago, human capital was viewed as merely a line item in a budget; an area of the budget that was subject to significant and dramatic cuts oftentimes. However, more contemporary organizations now see human capital for what it really is, a valuable resource that can make or break their organization. With this knowledge, many organizations have made great efforts to implement performance enhancement practices, in hopes of garnering a competitive advantage in an increasingly competitive marketplace (Delaney & Huselid, 1996).

Although researchers, such as Youndt (1998) have noted that it is human capital, which in the assistance of achieving organizational objectives, helps build value in said organization, much research is left undone. The body of research is comparatively small, and there are key questions that need to be attended to (Becker & Gerhart, 1996).

Significance of this Study

The primary significance of this study is that it may shed new light on the importance of human resource practices in promoting individual competencies that have a positive effect on the sustained performance in the workplace. It is these practices that improve individual performance that can be implemented by human resource professionals in their organization, across a variety of industries. This study should be of interest to both human resource professionals, as well as other members of management, as improving the organizational bottom line is a primary concern for all levels of management.

Research Hypothesis

In keeping in line with Delaney and Huselid’s previous study, it is predicted that positive relationships will be found in human resource practices and organizational performance. This study will more narrowly define this with the following research hypotheses:

1. There is a positive correlation between sustained organizational performance and value initiatives a) training, b) job enrichment and c) internal labor market.
2. There is a positive correlation between market performance and value initiatives a) training b) job enrichment and c) internal labor market.
3. There is a positive correlation between sustained organizational performance and the symbiosis of human resource practices and value initiatives such as: a) staffing and training and b) staffing and job enrichment.

Limitations

As this study is based upon secondary data there are limitations. The NOS data does not provide specific organizational financial data, therefore perceived organizational performance and market performance was utilized. In addition, there are some areas of value initiatives that were incomplete in the NOS data, as in measurement of training effectiveness. Human resource practices are also constrained by the data limitations, impeding complete symbiotic measurement.

The NOS questionnaire itself leads to limitations as well. In some questions, there is a forced choice given, without mid-point. The use of midpoints in every question would have been more preferable.

Another limitation occurs due to the NOS study not providing adequate explanation of how the random sample of establishments were chosen. These establishments were stratified by employee size, yet little other information was given, and is reflected in the lack of detail in the sample design section of this study.

Lastly, most of the measures provided in the NOS data set are nominal scale data. This affects the preciseness of the measurement of the variables.

Assumptions

There are several assumptions made in this study. First and foremost, it is assumed that the NOS sample design was appropriate and accurately represents the population. It is also assumed that that the persons contacted in the NOS data had knowledge of the value initiatives and human resource practices as well as the organizational performance. And lastly, it is assumed that these persons understood the survey questions presented and that their answers were accurate and truthful.

Conceptual Framework

Universalistic Perspective:

According to Dewar & Werbel (1979), the universalistic perspective has been adopted by many researchers in the human resource management field. Delery & Doty (1996) hypothesize that there are human resource practices that are superior to others, and as such all organizations should implement these best practices. They feel that

universalistic arguments are the simplest form of theoretical statement in the strategic human resource management literature because they imply that the relationship between a given independent variable and a dependent variable is universal across the population of organizations (p. 805).

Universalistic predictions require a two-step process. First, one must identify the strategic value initiative being utilized. Second, one must present the arguments that correlate these practices to organizational and market performance (Delery & Doty, 1996). This study’s first two research hypotheses were formulated using this perspective.

Configurational Perspective:

An emergent approach in strategic management literature is the configurational approach. Configurational theories show how multiple independent variables relate to a dependent variable (Delery & Doty, 1996). Research hypothesis 3 was formed utilizing this approach, with the two independent variables of value initiatives and the human resource practice of staffing being related to the dependent variable of organizational performance.

Definition of Terms

Human Resources Management

Human resource management “is a discourse and technology of power that aims to resolve the gap inherent in the contract of employment between the capacity to work and its exercise and thereby, organize individual workers into a collective, productive power or force” (Townley, 1994, p. 138).

This human resource management “approach acknowledges human resource management as a continuous process of balancing labor demand and labor supply” (Brand & Bax, 2002).

Human resource management is

a strategic, coherent and comprehensive approach to the management and development of the organization’s human resources in which every aspect of that process is wholly integrated within the overall management of the organization: HRM is essentially an ideology (M. Armstrong, 1992, p. 9).

Den Hartog & Verburg (2004) note that despite there being a single, widely accepted definition of human resource management, they quote Storey as defining HRM “as a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques”.

Internal Labor Market:

The internal labor market refers to an organization’s promoting employees and filling vacancies from within. There are two factors to the internal labor market; first and foremost a company must be willing to fill their positions from within the organization. This involves policies and procedures in place in the organization to facilitate this type of promotion.

In addition to being willing to promote from within, organizations must have the employees available for filling vacancies. This means that employees must be developed to move into successive positions within the organization, and more employees must be developed to fill their previous positions. A leadership development program must be in place to perform this value initiative successfully and consistently.

Job Enrichment:

According to Rothwell & Sredl, “job enrichment is a change effort that adds greater responsibility to a job” (p. 521).

Organizational Performance:

Organizational performance is “outcomes or results, with indicators of effort and achievement including productivity, customer or staff satisfaction, profit and service quality” (Burke & Litwin, 1989, p. 283).

Market Performance:

Market performance is how well an organization does in comparison with other organizations that do the same type of work. This includes the organization’s profitability as well as their market share.

Organizational Performance:

Organizational performance refers to how well the organization does certain tasks such as: the quality of their products and/or services, the development of new products and/or services, and how satisfied their customers are (Kalleberg, Knoke, & Marsden, 2001).

Recruitment:

“Recruitment is the process of finding possible candidates for a job or function” (“Recruitment”, 2004). An integral part of recruitment is ensuring that once talented candidates are brought on board, they are then retained for as long as possible, and utilized as efficiently and effectively as possible.

Training:

“Training is one of several methods to stimulate individual change. Its focus is short term and directed solely at furnishing the knowledge or skill that individuals need to carry out present work duties efficiently and effectively” (Rothwell & Sredl, 1992, p. 532).

Value Initiative:

A value initiative is a process or practice designed to bring about a desired result that is perceived as having worth in usefulness or importance to the organization. In this study, three value initiatives are studied, training, job enrichment and internal labor market.

Summary

Today’s business world is ever-changing and hypercompetitive. With the new opportunities that have arisen in recent years, new threats have emerged as well. To compete in today’s globalized economy, organizations must have a sustainable competitve advantage, otherwise risk failure.

One such competitive advantage is the effective and efficient use of human resource practices. Just as business has evolved, so has the world of human resource management. Today, human capital is seen as a valuable commodity to utilize strategically for the organization’s ultimate success.

This study hypothesizes that improved individual actions facilitated by value initiatives such as training, job enrichment and internal labor market development will equate to positive organizational and market performance. These practices are of value to both human resource professionals and management at all levels, as a valuable tool to sustain performance in the workplace.

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