The Impact Of Shrm On Performance Business Essay

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Bannister and Fransella states that we cannot contact an interpretation free reality directly. We can only make assumptions about what reality is and then proceed to find out how useful those assumptions are. Some assumptions are so deeply engrained that they are difficult to identify and express but they are nevertheless embodied in the way we approach life. These include the way we conceptualize, theories about and manage the employment relationship.

Defining reality for ourselves

We define reality for ourselves in the following manner

Orthodox thinking:

Orthodoc means correct or generally accepted opinion inculcated in the majority of members in any given society through the processes of socialization and education and sustained through sanctions against deviation. We donot generally question our orthodox beliefs, and therefore we donot pay much attention to them nor consider how they fram the interpretations we make of our world nor what other alternative there could be.

Alternative Approach

The following three approaches stand in contract to orthodox thinking


It is concerned with understanding the individual's conscious experience rather then analyzing this into fragments, it takes a holistic approach. It acknowledges the significance of objectivity(Sanders, 1982).


It is also concern with individual experiences but emphasises the individual's cognitive process.

Social Constructionism

It does not assume that a reality independent of observer exists. Reality is only what we construct ourselves and that not through our own cognitive process but the social processes of language, discourse and social interaction.

The wider social , economic, political and cultural context of HRM is diverse, complex and dynamic. The metaphor of a tapestry is therefore used to express the way in which its meaning is constructed from the interweaving and mutual influences of assumptions deriving from the basic perceptual, epistemological, philosophical and ideological positions. The notion of Wrap and Weft are used to discuss such key contextual elements as phenomenology, constructivism, social constructionism etc.

Best-practice SHRM:

High-Commitment Models

The best-practice approach highlights the relationship between 'sets' of good HR practices and organisational performance, mostly defined in terms of employee commitment and satisfaction. These sets of best practice can take many forms: some have advocated a universal set of practices that would enhance the performance of all organisations to which they were applied (Pfeffer, 1994, 1998); others have focused on integrating the practices to the specific business context (high-performance work practices). A key element of best practice is horizontal integration and congruence between policies. Difficulties arise here, as best-practice models vary significantly in

their constitution and in their relationship to organisational performance, which makes generalisations from research and empirical data difficult. Here, it is argued that all organisations will benefit and see improvements in organisational performance if they identify, gain commitment to and implement a set of best-HRM practices.

Universalism and high commitment

One of the models most commonly cited is Pfeffer's (1994) 16 HR practices for 'competitive advantage through people' which he revised to seven practices for 'building profits by putting people first' in 1998.


Pfeffer (1994) explains how changes in the external environment have reduced the impact of traditional sources of competitive advantage, and increased the significance of new sources of competitive advantage, namely human resources that enable an organisation to adapt and innovate. With the universalist approach or 'ideal set of practices' (Guest, 1997), the concern is with how close organisations can get to the ideal set of practices, the hypothesis being that the closer an organisation gets, the better the organisation will perform, in terms of higher productivity, service levels and profitability. The role of Human Resources, therefore, becomes one of identifying and gaining senior management commitment to a set of HR best practices, and ensuring that they are implemented and that reward is distributed accordingly.

Measuring The Impact of SHRM on Performance and the Balanced Scorecard

It is now appropriate to consider in more detail how strategic management processes in firms can be improved to deal more effectively with key HR issues and take advantage of HR opportunities. A study by Ernst & Young in 1997, cited in Armstrong and Baron (2002), found that more than a third of the data used to justify business analysts' decisions were non-financial, and that when non-financial factors, notably 'human resources', were taken into account better investment decisions were made. The non-financial metrics most valued by investors are identified in


This presents an opportunity for HR managers to develop business capability and demonstrate the contribution of SHRM to organisational performance. One method that is worthy of further consideration is the balanced scorecard (Kaplan and Norton, 1996, 2001). This is also concerned with relating critical non-financial factors to financial outcomes, by assisting firms to map the key cause-effect linkages in their desired strategies. Interestingly, Kaplan and Norton challenge the short-termism found in many Western traditional budgeting processes and, as with the Ernst & Young study, they imply a central role for HRM in the strategic management of the firm and, importantly, suggest practical ways for bringing it about (Boxall and Purcell, 2003).

Kaplan and Norton identify the significance of executed strategy and the implementation stage of the strategic management process as key drivers in enhancing organisational performance. They recognise, along with Mintzberg (1987), that 'business failure is seen to stem mostly from failing to implement and not from failing to have wonderful visions' (Kaplan and Norton, 2001: 1). Therefore, as with the resource based view, implementation is identified as a key process which is often poorly executed.

Kaplan and Norton adopt a stakeholder perspective, based on the premise that for an organisation to be considered successful, it must satisfy the requirements of key stakeholders; namely investors, customers and employees. They suggest identifying objectives, measures, targets and initiatives on four key perspectives of business performance:

â- Financial: 'to succeed financially how should we appear to our shareholders?'

â- Customer: 'to achieve our vision how should we appear to our customers?'

â- Internal business processes: 'to satisfy our shareholders and customers what business processes must we excel at?'

â- Learning and growth: 'to achieve our vision, how will we sustain our ability to change and improve?'

They recognise that investors require financial performance, measured through profitability, market value and cash flow or EVA (economic value added); customers require quality products and services, which can be measured by market share, customer service, customer retention and loyalty or CVA (customer value added); and employees require a healthy place to work, which recognises opportunities for personal development and growth, and these can be measured by attitude surveys, skill audits and performance appraisal criteria, which recognise not only what they do, but what they know and how they feel or PVA (people value added). These can be delivered through appropriate and integrated systems, including HR systems. The balanced scorecard approach therefore provides an integrated framework for balancing shareholder and strategic goals, and extending those balanced performance measures down through the organisation, from corporate to divisional to functional departments and then on to individuals (Grant, 2002). By balancing a set of strategic and financial goals, the scorecard can be used to reward current practice, but also offer incentives to invest in long-term effectiveness, by integrating financial measures of current performance with measures of 'future performance'. Thus it provides a template that can be adapted to provide the information that organisations require now and in the future, for the creation of shareholder value


HR function plays an important role in an organization progress and growth.

The wider social , economic, political and cultural context of HRM is diverse, complex and dynamic. The metaphor of a tapestry is therefore used to express the way in which its meaning is constructed from the interweaving and mutual influences of assumptions deriving from the basic perceptual, epistemological, philosophical and ideological positions. The notion of Wrap and Weft are used to discuss such key contextual elements as phenomenology, constructivism, social constructionism etc.

Human Resource Departments add value to a business by ensuring:-

􀂃 How do the processes such as staffing, hiring, communication, and compensation;

that govern how work is done, enhance organizational competitiveness, and add


􀂃 Ensure recruiting the right caliber and grade of existing and new employees by

determining job descriptions, people profiles and skills criteria to match job role.

􀂃 Ensure personnel policies and procedures are followed consistently by all

departments within a company.

􀂃 Ensure who is responsible for Human Resources work? To what extent do managers

view themselves as HR managers as well as Operational managers?

􀂃 Ensure when and how should Human Resources be proactive, reactive, or


􀂃 Ensuring that staff ratios are compatible to the projected cost base and taking

intervention action where recruitment gets 'overblown'. This ensures that a company

employs the right volume of people required; maintaining the company margins,

which in turns ensures the continuing viability of the company.

􀂃 Offers impartial personnel function that restricts and controls all personnel within the

business to manage people within the correct legal context and not allowing them to

inadvertently side step employment law and legislation.

􀂃 Ensures that internal promotion and selections are carried out in a fair and equitable

manner using the same base criteria for each candidate. This in turn means the right

people get promoted which enhances the role effectiveness and increased efficiency

of the job delivery.

􀂃 Ensure that pay grades are equitable and reviewed with similar type roles in

equivalent external organizations to keep attracting the best candidates.

􀂃 Ensure the financial contributions of Human Resources.

􀂃 Ensure how do HR systems enhance the intellectual and managerial capacity of the


HR Professionals must be knowledge experts of external business realities before they

can frame, execute, and create substantive value through even the basic of HR agendas.

􀂃 What abilities do we need so that we can understand and respond to short-term and

long-term market demands?

􀂃 How do we invest in HR practices that deliver business results?

􀂃 How do we organize HR activities to deliver maximum value?

􀂃 How do we create an HR strategy that sets an agenda for how HR will help our

company succeed?

When HR Professionals respond to these questions, they will know why others would

benefit by listening to them, because they will be delivering real value-and they will

know what that value is.