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This research is about the evaluation of HR performance / effectiveness. As HR is a business field, which has not gained the intent of top management in Pakistan. There can be two reasons; 1-Top management is unaware of HR abilities to get them competitive advantage or 2- HR is incapable of delivering competitive advantage, which leads us to study the perception of managers pertaining to different background information like experience, managerial level, and department, positional and academic background. From this background information, researcher evaluate the perception of HR effectiveness with HR variables; Services, Role and Contribution.
The researcher evaluates performance of HR from private and public firm in Pakistan, data was collected randomly and not from any particular industry. The respondent taken for this research study is 100 managers/executives. The result showed that only independent variable 'category of managerial level' is significant in all the three HR variables; Services, Role and Contribution while interesting significance came in the interaction of department and academic background with category of Managerial levels. Result showed that middle management has high recognition of HR than top and lower level managers.
The implication is that HR is being recognized highly by the newer employees in business world and middle level managers. HR service, Role and contribution are important and considered by all level but top level managers have high expectations from HR due to which HR is ranked lower by top level managers than middle level managers.
Business environment is facing dramatic changes, in the late 90s this rate of change has increased because of globalization, advancement of information technologies and environmental shift like economic, demographics and regulatory shifts have changed the way business around the world used to operate. Now the structure in business has been changing becoming flat, hybrid and virtual. These changes in the organization structure has developed new functions like information technology and it is the duty of HR departments to develop and implement new process and redesign or reengineer business processes. On the whole, organization are becoming more flexible in operations and becoming more of a learning organization, where information flows freely and organization are learning on the continuous journey of survival.
With these changes in the business world, the importance of human resource has increased in the corporate world. Now, the role of human resource is seen as a strategic contributor and not as a cost center as it is been seen traditionally. To manage the human resource in this uncertain condition is an important task of human resource department and being a strategic partner, human resource is an asset to the company and it can give companies not only a competitive advantage but it can give companies a sustainable competitive advantage the reason being human resources are scarce and cannot be copied easily.
With all these benefits of HRM, researchers are uncertain about the best practices of HR, many believe that there should be a contingency approach, in which practices are developed by organization with suitable to their internal and external environment. While in Pakistan, we are still trying to change the name of our service personnel as "human resources". The fact is that the HR function is evolving and we need to move from administrative functions, which is dynamic and capable of contributing positively to the baseline. Our situation is different from that of developed markets because of human resources is here mainly practiced by multinational corporations. A few enlightened Pakistani companies also have a highly developed HR function but these practices are a reflection of practices from the West or Japan. But a critic of human resources seems to be the same everywhere in the world and is the heart of the problem. The HR in Pakistan seem as a cost center not as a strategic contributor and HR perceive to provide outdate solutions.
To overcome this problem, no one measure will be alone sufficient to transform the negative perceptions of existing human resources. More importantly, nobody is going to have human resources to the level of acceptance that is intended - HR has to prove itself. One of the debaters of financial times perceives that HR has a good time ahead in knowledge economy, as HR will provide the boardroom with talented people who can demonstrate their worth in financial improvement in their organization (Leon, 23).
1.1 STATEMENT OF THE PROBLEM:
In Pakistani scenario, companies established Human resource department but still most question its position in the organization. Some managers believe that Human resource has no role in providing value to the organization while many managers believe that Human resource provide sustainable competitive advantage. Those managers who understand the value of Human resource for future success believe that HR is a valuable asset. In order to understand these differences in perception of Managers about HR, we have to understand their beliefs which are developed on the basis of academic background, positional background and experience with Human Resource field. So my research would study the relationship of Manager's background on the perception of HR effectiveness.
1.2 THEORETICAL / CONCEPTUAL MODEL/FRAMEWORK TO BE USED:
Line Manager's perception
HR Manager's perception
Background of Managers
1.3 VARIABLES TO BE STUDIED:
Background of Line and HR Managers
Category of the manager
Department of manager
Experience of Manager
No of HR employee ratio over total employee/ HR employment ratio
Time period since HR has been established.
Perception of HR effectiveness by Line and HR Managers
Sub Variables of HR Effectiveness
(Patrick, Gary, Scott and Barry, 1998).
1.4 PROPOSED RESEARCH HYPOTHESIS:
H01 = HR Managers and Line Managers have equal perception regarding HR effectiveness
H02 = Managers with HR academic background and Managers with non-HR academic background have equal perception regarding HR effectiveness
H03 = HR Managers belonging to different categories and Line Managers belonging to different categories have equal perception regarding HR effectiveness
H04 = HR Managers and Line Managers of different departments have equal perception regarding HR effectiveness
H05 = HR Managers and Line Managers of different Experience have equal perception regarding HR effectiveness
H06 = Companies with different HR employment ratio have equal perception regarding HR effectiveness
H07 = Companies with different time period of HR establishment have equal perception regarding HR effectiveness
1.5 RESEARCH SCOPE & LIMITATIONS
The study is limited to the sample size collected, time constraint to incur in-depth study, utility constraints and investigators prior knowledge. The data generated through the study should not be generalized to all the Managers perception in Pakistani Firms.
CHAPTER 2: LITERATURE REVIEW
What is HR?
The function of Human Resources in an organization is to design a formal system which guaranties the effective and efficient use of human resources to achieve organizational goals (HRM book, 9th edition)
The function of HR activity is to provide a system, which ensures continuous supply of desired level of Human resources, planning for future human resource requirements and ensure the desired results from the employees. To summarize the Goals of HR, activities they perform and how these activities integrate with organization to achieve success are depicted in figure 1.
The goal of productivity can be measured in terms of output per employee. The quality is essential in getting customers satisfaction and with good quality human resource; organization can provide quality product and services. In order to improve service provided by the organization, HR needs to redesign process, requires changes in corporate culture, leadership styles, and HR policies and practices (Human Resource management book, 9th edition).
Evolution of HR Management
HR begins its formal operation in 1900, in that time most HR decision like; hiring, firing, training and pay adjustments were made by the supervisors. From the studies conducted in scientific management by Frederick W. Taylor, help management make the work more efficient and productive. Then in mid 1920s, Hawthorne studies revealed the impact of work groups on individual workers which lead to the development to the use of employee counseling and testing in industry. During the era of 1930s to 1950, major laws came which bring in the development of labor unions and standardized the HR operational role in performing activities like; keeping payroll and retirement records, arranging stockholder visits, managing school relations, and organizing company picnics was often the major role of personnel departments.
During the era of 1960s to 1990s, with increased regulation constraints, HR has become more professional and concern about fulfilling legal requirement of HR policies and practices. As time passes, majors organizational shift like; downsizing, automation of work operation, closed plants or restructuring and outsourcing change HR focus to more strategic values and job design on worker productivity. The evolution of HR from traditional to current practice can be depicted in figure 2 (Human Resource management book, 9th edition).
The reason behind this shift in practice is due to these four factors, which accounts for growing importance of Human Resource management;
Economic Shifts: In 1970s, economic problem emerges like; inflation, sluggish capital investment and slow growth which in turn put pressure on productivity. In addition, economy continues to be more service oriented and thus increasing labor intensive rather than capital intensive as before. These problems put pressure on HR to respond to strategic issues.
Demographic Shifts: In 1980s, baby boomer have entered into the market with new passion and desire to grow and thus with new culture coming into the organization, shift the way HR role was to be performed; putting more focus on career development, supportive work environment and professionalism. The problem like aging of workforce, maintain work and family life and managing diversity cause HR to be more proactive to bring change in the working culture.
Regulatory Shifts: New laws related to Health and safety, affirmative action and some form of corporate bill of rights change HR in policy making.
Management becoming more complex or restructuring: In the coming era, HR manager's jobs are going to be complex and difficult due to globalization and organization adopting strategies like integration, restructuring, merging and outsourcing. Now the critical concern would be on selection, development and compensation at managerial levels.
Despite these shifts in environment, human resource management area made little progress. Corporations are still struggling with human resource problem but few have respond to this demand by creating strong human resources management function (Tichy, Fombrun and devanna 1981). These human resources problem starts when the business expand, moved from organic structure to functional structure, reason for arriving problem as this stage is the philosophy of an entrepreneur who put more focus on other function and does not give importance to HR. In this century, the things are changing quickly as we discuss the factors above. All these factor have change the way business were operated before, now business needs to be cost efficient, develop new effective processes, deliver quality services, innovate new products and be flexible with customer demand. In order to achieve all these success factors in today's business, it has to deal with complex and dynamic environment, manager needs intellectual human capital and without it no business can achieve their strategic objectives or gain competitive advantage (Becker and Gerhart, 1996).
Technical and strategic human resources effectiveness
Both internal and external stakeholder prefers technical HRM practices, external stakeholder prefer to conform while internal stakeholders (line manager and executives) prefer high quality technical HRM practices. Technical HRM practices include recruiting, selection, performance measurement, training, and the administration of compensation and benefits. The impact of technical human resource management activities and its impact on firm performance is an important field of study in HRM, industrial relation and organizational psychology. While there are numerous researches that argues that these practices can improve firm KSAs, increase motivation, reduce turnover, retain quality employees and discourage non-performers (Jones & Wright, 1992).
In contrast there is recently develop practices of strategic HRM, stakeholders does not tend to prefer these activities to adopt but there are numerous research that prove that strategic HRM practices has positive effect on Firm performance, includes activities like employee empowerment, high quality work practices, flexible human resources, team-based job designs, scanning the environment with respect to firm's strategic needs and develop the required resources through planning to implement strategy and achieve operational goals (Huselid, Jackson and Schuler, Feb, 1997). Strategic Human resource practices are used for implementing and development of a firm strategy and thus its importance has been increased after the professionalism in this has increased. Strategic human resources management has three perspective, the universalistic perspective, contingency perspective, and configurational perspective. Universalistic perspective believes that there are best practices of HR which are better than other function and firm should adopt those practices. Contingency perspective believes that HR practices and firm strategy must be integrated to get extraordinary results. Contingency perspective believes that HR practices should be tailored and fit with internal and external environment and especially with the strategy. (Hamish G. H. Elliott).
Resource based approach
The resource based view of getting competitive advantage believes that the resources and capabilities are the foundation for long term strategy for two reasons. First internal resources and capabilities views as the sources of getting competitive advantage and secondly firm get high returns from these sources. However, these sources may not provide sustainable competitive advantage because other competitors may be imitate or buy the sources, so the sustainable competitive advantage is achieved when the company adopts Strategy which have not been simultaneously implemented in existing or potential competitors and when these other companies may not be able to imitate the benefit of this strategy (Barney,1991).
Firm resources includes all the assets, capabilities, processes, attributes, information and knowledge etc which is controlled by a firm through which it conceptualize and implement strategies that improve its efficiency and effectiveness(Daft 1983, cited in Barney, 1991, p. 101). These resources are categorizes as physical capital resources, human capital resources, organizational capital resources, financial resources, technological resources and reputation. To sustain competitive advantage from these resources, if they are available freely on the open market, as proposed by Barney (1986b), so that anyone can attain the resource and may used it to achieve the same or better results, unless the resources are limited in supply. By contrast, a more favorable approach to sustainable competitive advantage is the use of intangibles (or implied) resources that are generally built rather than buy (Dierickx and Cool, 1989). Human resource is the only resources which are rare, valuable, incompletely imitable and non-substitutable resources, while the other resources like reputation for quality may be built (rather than bought) by following a consistent set of production, quality control policies for a specific time period but human resources cannot be developed exactly the same. (Lado & Wilson, 1994; Pfeffer, 1994; Wright & McMahan, 1992).
From the point of view of resources based perspective that firms want a competitive advantage could not be achieved through purchasing resources or imitate a sustainable competitive advantage by acquiring a set of best practices universalist. An Firm should adopt a configurational perspective and create a system of HR practices that are tailored to the competitive strategies of the enterprise concerned, and internal practices, policies and resources - allows both vertical and horizontal fit. This way, the benefits exists in the rare, imperfectly imitable and not substitutable human resources will utilize properly (Dierickx and Cool, 1989). Wright et al. (1994).
The competency based approach of getting competitive advantage through HR believes that there are two types of systems; competence-enhancing HR system and competence-destroying HR system. The first proposition developed from these system is "Firms with HR systems that facilitate the development and exploitation of all the organizational competencies related to managerial, input and output based will have a greater likelihood of achieving competitive advantages than firms that have HR systems that destroy these competencies and/or pre- vent their exploitation." In getting the firm competitive advantage should not only have competence enhancing HR systems but these systems should be not be duplicated, unique and create synergy in the system and thus the second proposition is develop "Firms with configurations of competence- enhancing HR system attributes that are unique, causally ambiguous, and synergistic will have sustained competitive advantage over firms that have HR system configurations that are typical, causally determinate, and non synergistic." From the above two proposition we have get the idea about how HR is able to provide competitive advantage but in today's business world, we have to sustain that advantage to remain in the position as leader. The sustainability of HR competitive advantage depend upon HR processes are deployed, develop organizational competencies. Organizational processes may be oriented toward self maintain process or self renewal process. In the self maintaining process, it is all about maintaining the status quo, where HR focus would be on cost reduction with efficient function such as wage administration, grievance handling, and so forth while on the self renewal process, it is about creating developmental transformation by building imagination, commitment and free will in their employees. In order to sustain the competitive advantage the third proposition is this "Firms with self-renewing HR processes will more likely generate competencies at a higher rate (and, thus, will more likely achieve sustained competitive advantage) than firms with HR processes that are self-maintaining." (Lado and Wilson, Oct., 1994),
Most researchers have linked single HR practices with firm performance such as compensation or selection but these single practices has limited ability to generate competitive advantage but as a whole and integrate these activities, it can realize its full competitive advantage (Barney, 1995: 56). On the contrary others argue that there are set of practices for managing employee that has positive effect on firm's performance (Pfeffer, 1994; Schmidt, Hunter, & Pearlman, 1981). Different researcher's opinion of best practices is shown in table 2 (Brian Becker and Barry Gerhart, 1996).
High Performance Work Practices, By Authors
Kochan & Osterman
Self-directed work teams
Problem-solving groups/quality circles
Suggestions received or implemented
Hiring criteria, current job vs. learning
Initial weeks training for production, supervisory, & engineering employees
Hours per year after initial training
Information sharing (e.g., newsletter)
Hiring (non entry) from within vs. outside
Formal performance appraisal
Promotion rules (merit, seniority, combination)
Feedback on production goals
Conflict resolution (speed, steps, how formal)
Job design (narrow or broad)
Percentage of skilled workers in facility
Supervisor span of control
Average total labor cost
Benefits/total labor cost
Although HR often focuses on the practical level, the strategic approach will probably be a characteristic of higher level if they were having one of the best practices generally. In other words, if there is an effect of good practice, is more likely to be in the architecture of a system. Although Pfeffer (1994) calls them management practices, many of the features identified as part of a sliding system of high performance work, starting on this architecture. For example, one architectural feature of a system is that high-performance human resources is valued and rewarded. It is this architectural feature that should have the power to generalize (best practices) that has effect on business results. It may be best HR system architecture, but whatever the activities are performed in an individual organization, HR practices should be harmonized with each other, and is compatible with the HR architecture to ultimately have an effect on performance of organization. Case studies of Lincoln Electric and Hewlett-Packard reflect this interpretation (Milgrom & Roberts, 1995). Two companies with dramatically different HR practices probably are quite similar to the HR architecture. For example, although the specific design and implementation of a salary and selection policies are different, the similarity is that both pay for desired behaviors and performance results in an effective way depends on how to select and retain people who fit their culture.
After all this discussion, question arises that how effective HR is? Many researchers have tried to measure the effectiveness of Human resources. First approach in evaluating Human Resource effectiveness in terms of Firm financial performance (AMJ Special Issue, 1996; Becker & Gerhart, 1996; Delery & Doty, 1996; Huselid,1995, Becker, Huselid, Pickus, & Spratt 1997). Second approach has been to demonstrate the value of Human Resource through theoretical modeling. For example, Wright, McMahan and McWilliams (1994) from the resource-based perspective of firm, researcher analyzes how human resources department delivers to prove of being valuable, rare, inimitable, and non-substitutable, thus fulfilling the criteria of a source of sustainable competitive advantage. The third approach to use HR metrics to measure performance relative to other firms or its past performance Fitz-Enz (1980, 1984 and 1990). Fourth approach was to compare the perception of Line and HR executives of HR effectiveness through HR service (in terms of importance and delivery), Role of Human Resource and contribution by Human Resource in developing and achieving strategic objectives (Wright, McMahan, Snell and Gerhart, 1998).
Researchers have preference for the use of meaningful matrix that the business world expects (e.g., share- holder return, profits, organizational survival, productivity, cycle time, customer complaints). But the appropriate variables vary with the environmental context in which the particular industry exists and another factor is strategy of a firm in a specific period varies with company to company. For example firm with the emphasis on growth would have a low accounting profit and vice versa, so in order to measure HR performance and align it with firm performance then HR measurement should evaluate on the basis of firm objectives. So there is no generalize model for evaluating HR effectiveness, it varies.
Without capital market measures, however, to conduct research on a wide range of business units with different objectives can sometimes move a researcher from a standard metric. Some devices can be focused on profitability, but others are fighting for market share or growth, empirical study will probably find little correlation between HR and performance of the device if the effectiveness of each unit is defined in terms of profitability or growth alone. Instead, it may be necessary to inject a degree of subjectivity in measuring the effectiveness of a given unit in achieving its key objectives (Campbell, 1977; Kahn, 1977; Mahoney & Weitzel, 1969; Tsui, 1990).
Another problem in evaluating the HR performance is that HR activities varies from company to company and there is no standard practices in which the companies in a particular industry can be compare and evaluated. So may be researcher should focus on standardization and replicated activities in HR measurement and one way is different researcher jointly design a measure to evaluate (Brian Becker and Barry Gerhart, 1996).
HR performance can also be measure on balance scorecard approach in which performance is assess by three major stakeholders; Investors, customers, and employees. However there is one problem with that approach is because employees were evaluating HR so they may not know what they want and what is best for the firm. This problem can be solved by taking survey from top line executives; there are three reasons for that first, they are users of the services that employees are dependent, and that manager who have a vested interest in these services and practices that have the greatest positive impact on employees. Second, have a more extensive knowledge of what could be better for the company, and are in a unique position to evaluate trade-offs between services that may be desired by employees, but would put the company in financial losses. In fact, these people are in an ideal position to make decisions about how to balance the wishes and returns to its shareholders, customers and employees. Therefore, we turn to the evaluation of the effectiveness of the HR function by probing of the line and human resource executives and managers in our sample of firms (Wright, McMahan, Snell and Gerhart, 1998).
Evaluating HRM effectiveness
There are numerous researches which evaluates the performance of human resource management as a factor contributing to the success of the organization is evident to business management and research (Poole and Glenville, 1996). Effectiveness is often defined as doing the right things in an appropriate time. Most systems and human resource management practices have been critically reviewed as traditional problem solvers, the main organizations in general and human resources staff, in particular, has been not able to do right thing even if they are efficient. The aim of the effectiveness comes with the requirements of human resource management in a changing business and management context, with increasing pressure of competition and public sector efficiency.
This context is itself evolving. It began with the adoption of human resource management as a strategic partner (Walton and Lawrence, 1985, Beer et al., 1985), in the era of the quality movement, re-engineering of business processes (Hammer and Champy, 1993) and is currently about a contemporary setting, where knowledge management, digital and virtual organisation (Tapscott, 1996) represent the key frontiers in the study.
Combining the dual effect of different perspectives and a changing environment a wide range of seemingly disparate research falls under the auspices of the analysis of the effectiveness of human resource management. One way to structure and organize these studies is to suggest that there are two dimensions that underlie most existing studies. One dimension is given the degree to which the interests of efficient management of human resources require an internal focus of the organization or external standards for guidance. The other dimension is the extent to which the value of being subjective or objective framework for the effectiveness of human resource management is adopted. Figure 3 illustrates the different perspectives outlined by the segmentation of structural research.
Objective FactorsFIGURE 3
External OrientationBest Practice Models
Internal OrientationFit with Business
This research focuses on Subjective factors with internal orientation because this is the domain most neglected and there is a growing concern for the perception of HR staff role. (Eisenstat, 1996). The research also suggests that the perception of HR staff is not poor but there is disassociation between perception of HR staff and overall HRM effectiveness.
This dissociation between the subjective evaluations of HR staff and general standards of the effectiveness of the HRM suggests that other perspectives on the effectiveness of HRM can be much more valid and reliable. But this disassociation of what manager and employees have to say about HRM staff and HRM practices are in conflict rather the result should suggest that there is a link between assessments of the effectiveness of HRM staff and overall effectiveness of HRM - Good HR staff gives good HRM performance while poor HRM practices perceives negative evaluation of HR staff (Baruch, 1997, Mabey et al., 1998). The research does not suggest that subjective perception of HRM and HR staff should overtake objective measure in evaluating HRM effectiveness but the objective of subjective perception is to complement and support the results (stephen Gibbs).