Hrm Performance Link Through Resource Based View Commerce Essay

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The organization performance is driven by deep domain expertise and knowledge in integrating the functions with information technology. The company HKI has created a niche market for its products with the past experience and success in the banking domain. HKI secures projects through relationship marketing and earlier reputation in the domain. In my opinion the company's growth has been stagnant for past few years with the advent of highly competitive market in information technology arena. The major challenge for the company is to retain knowledge workers because they get attracted to the global environment while HKI has presence in only domestic market. (HRM & Knowledge workers-6) As outlined under the sub-heading "The organizational perspective: managing knowledge workers" There are many uniqueness in functioning of an organization that has business in the area of knowledge creation, which are significant to the performance of the business. The company that is into business of knowledge creation is always under the threat of dynamic market where products and labour markets are ever changing along with the technology. Where knowledge workers are the pivotal part of the organization the role of the management is to manage and create an environment, so that incessant flow of knowledge is encouraged. One of the suggested way of managing knowledge workers are giving them lot of independence to select in what technology they want to work, less monitoring and controlling systems. The project based approach leads to critical situations where the knowledge worker builds a strong sense of belongingness and identification with their project team. Furthermore, if they are working outside the boundaries of the firm there are possibilities of valuable knowledge being eroded.


For the purpose of the assignment I have conducted telephonic interview with few of my colleagues and for better understanding of the reasons prevailing inside the organization I also conducted a telephonic interview of an ex-employee who worked with the organization for more than five years before joining competition. After analyzing the survey results I have identified and suggested few key improvement areas as stated below. In my opinion the key issues in the organization since its inception is being carried on in today's competitive environment, are lack of clarity in the performance evaluation process and undefined opportunity in career progression, which impacted the resource retention.

Horizontal and Vertical alignment of HRM processes and Key Performance Link

Recruitment and Selection

Recruitment process is driven by specific need and demand by the ongoing project. The functional heads manage the recruitment and selection process in the existing system along with the Managing Director. A current employee recruits specific knowledge worker when the company gets a new contract or a void created by adhoc attrition. One of the major issues is HKI has no definite methods and policies laid to attract suitable talent into the system, which creates a gap in negotiating prowess of the company. As advocated by Wright's (1998) the five resource-based view of a firm's criteria, which might offer a competitive advantage. Firstly, recruitment may add importance by enhancing labor cost efficiencies and creating customer perceptions of the company's products or services. Secondly, recruitment strategy should try to find and identify talent, which is scarce in the labor market. Thirdly, an organization's policies of recruitment practices might be such a difficult set of tactics that it is practically incomparable. In the fourth case, recruitment might be non-substitutable organizational practice to the scope that the recruitment strategy is one of its kind and distinctive to one organization. The fifth strategy is to create maximum advantage, and recruitment should be in tandem with other HR practices, so that recruitment may strengthen and improve the benefits of the other HR functions, such as compensation, selection, and performance appraisal. When these five conditions are aligned and achieved within the organization, recruitment might make probable contribution to company's financial performance. (Orlitzky, 2005)






Organizational Intelligence

Status Quo

Innovative/ autonomous


Muddling through



In the case of HKI I can assess Windolf's typology of recruitment strategy; it is observed that HKI can be partially placed across the three quadrants. The status quo is focused on attracting home grown talent, particularly as far as demographics and socio-economic status are concerned, and thus consciously relies on social networks and referrals. It is also observed in case of HKI referred as status quo firm, changes in technology and job requirements but does not change recruitment practices. Status quo firms are classified by low organizational astuteness and high labor market power and have a traditional predetermined position rather than an innovative one. In case of HKI we can partially link with flexible recruitment strategies as firms adopt these strategies that have weak market presence, thus being forced to acclimatize to ever-changing market conditions. HKI can also be assessed with muddling-through recruitment, which is placed in the low quadrant that involves less strategic thinking and also has less professional expertise than in flexible recruitment method. This recruitment strategy also leads to high rate of attrition in the organization. (Orlitzky, 2005). Though the company operates only in domestic market there is a strong need for employer branding to attract talent outside the organization and retain within the organization.

As advocated by Schmitt and Kim the important aspect in an organization is the decision to employ personnel. It is important because all the activities within the organization is directed and enacted by the people who are involved in the organization. (Schmitt&Kim, 2005)

Performance Evaluation

The performance evaluation is normally done looking at the overall business performance during that particular financial year. The individual performance is mainly measured by the perceived inputs of the concerned functional heads. There is no individual involvement in this self-appraisal process, which creates a void in psychological contract between the knowledge workers and functional heads.

As suggested by Bratton and Gold performance evaluation and appraisal process have become key features of the organization to encourage human capital towards competitive edge and achieving high performance. The purpose of performance evaluation and management is to systematically approach towards the management of employee performance and establish a link between performance and organizational objectives. It is observed that generally it is difficult to measure the performance of a knowledge worker. It is difficult to enforce performance management system because knowledge workers are not very keen to have hierarchical career progression and many knowledge workers will resist moving into managerial positions. (Bratton & Gold, 2007). Without having any performance system in the organization it is becoming difficult to assess the right people for the right work and which is causing dissatisfaction in the client and damaging business relationship. On the other hand key knowledge workers are getting monotonous without getting further challenges in their work. All in all the overall resource allocation is becoming unsystematic.

Rewards and Recognition

Currently there is no performance based rewards and recognition available to motivate the employees. The financial award is based on the annual financial performance of the company. This is one of the key issues in retaining the human resources and key knowledge workers inside the organization. As advocated by Edward E.Lawler III, the objective of reward and recognition system is to assess what behavioral impact they can have in organization. The implementation of reward system can influence the following factors, which, in turn, influence organizational effectiveness.

Attraction and Retention: The kinds of reward system in place influence the attraction and retention of maximum people inside the organization. It is also observed that better performers need to be rewarded more highly than poorer performers. It is important the way rewards are administered and spread influences that is attracted and retained. It is seen in many organizations that merit-based reward system often attracts performing individuals.

Motivation: Reward system can be a great motivating factor. The reward systems that are important to individuals can influence their motivating factor in an environment. It is observed that good hygiene will only lead to average performance, preventing dissatisfaction, but not by itself creating a positive attitude or motivation to work. To motivate the employee management must enrich the content of work they ask them to do, building into tasks for example greater levels of responsibility, and the opportunity to learn new skills.

Culture: Organizational culture shapes the ways in which people behave in the organization and hence affects the way things get done. IT industry is heterogeneous and hence they feel absence of an organizational culture. It is important that how reward systems are developed, implemented, and managed, they can affect the culture of the organization largely.

Reinforce and Define Structure: The reward system has very less impact on the overall structure of the organization. It is observed that a well-defined reward system is highly hierarchical and the degrees to which it allocates rewards on the basis of the movements up the hierarchy.

Cost: Reward systems are the major cost factor in an organization. In HKI the pay system amounts to approximately 80% of the operating cost (Source: It is important to strategically define the reward system, because it should be in tandem with the organizations capacity to pay. A well-designed pay system will be in tandem with organizations financial performance. If the organization has money to spend there might be an increase in cost and when the organization doest not have money there might be a decrease in cost. The overall objective of an organization is to lower the cost of reward system compared to other competitors in the market. All in all a well-designed reward system is one of the key motivators to retain talent within the system. The reward system in an organization should be looked into as a cost-benefit model. They key is to identify the outcomes needed in order for the organization to be successful and then design the reward system, so that the outcomes will be beneficial for the future of the organization. (Edward Fomburn, Tichy & Devanna, 1999)

Recognition is considered to be the precious reward for the job well done. The people feel honored and are hence better motivator. Employees feeling motivated when their jobs well done are recognized, are operating at a level of motivation referred to as 'esteem need' level by Maslow.

Critical Analysis (Retention through Motivation)

The company has grown its business in a specific business domain in the domestic market with limited amount of human resource, the survival and success of the company is based on its ability to develop and implement Information Technology product and services as per the domain requirement. In this delivery structure 80% resources are technical developers and are assigned to specific roles that are non-substitutable. As predicted by Peter Drucker that future changes in society would be based on an increase in the flow of information. Knowledge would be the valuable resource and would know no barriers and result in a large group of workers. Drucker named them Knowledge-workers. The crucial distinctiveness of these workers is their level of education that makes education and development a fundamental concern for society. "Drucker's definition of the knowledge worker is one who works primarily with information to develop and use knowledge in the workplace". (Wallin&Stipic, 2007) The critical impact on the organization may arise during any point of project lifecycle if company has to accept any single resignation from its employees. It is also observed that a small percentage of employees leave the organization due to lack of employer branding. In my opinion lack of employer branding creates a gap for an individual in the social circuit, which leads him/her to find a better brand.

The factors that motivate people are found to change with age or going up the management ladder. Young employees are likely to be motivated by the challenges in his job whereas the senior employees are motivated by recognition for a job well done. As a person grows older the priorities in life shift and hence the factors that motivate him or her changes. As one moves up the management ladder, the factors that motivates a man changes due to the needs moving to a higher level in their advancing careers. Individuals are unique and hence what motivates one is different from what motivates the other. Promotions and growth in the organization are the most important motivating factor and job security is the least important factor for knowledge workers. Absence of a good working condition brings in the maximum dissatisfying and absence of job security is the least dissatisfying factor. Knowledge workers are most dissatisfied when the ideas or the suggestions that they put forward to the management are turned down. Autonomy is an important job characteristic and thus employees need to have freedom to handle the problems of their work. No-financial incentive is more effective tool for the knowledge workers and people in the higher income group. It is also observed that leadership is one of the most important factors that influences motivation. Motivation could be simple at times; it could be achieved through small but conscious efforts. Most of the people are motivated when they get recognition for the job well done while some other get motivated by simply completing the job successfully.

It needs to be stated here that in this particular working environment, people are doing jobs they don't enjoy, as their managers never show appreciation. These employees conclude that if this is what work is like here, at least they ought to be paid well. Money thus becomes a psychological exchange for enduring a miserable job.

To overcome the situation company has to focus on the basic employee retention strategy using financial and non-financial motivational factors, furthermore the company should build and strengthen psychological contract with the employees through a one-to-one discussion about individual career progression and succession within the organization.

Suggestion and Improvement

On the basis of above critical analysis I would recommend the implementation of the following human resource management processes and practices in view of improvement in long-term resource strategy and retention of resources through motivation and psychological contract. As advocated by Herling and Provo the human resource is of great importance as it represents and embodies a company's knowledge that comprises their competitive strength. In knowledge base firms it is therefore of paramount value to be able to retain that knowledge in order to preserve their competitive edge (Wallin & Stipic, 2007)

Establishing dedicated human resource function and strategy: The first activity is to form a human resource department with a HR head within the organization participating in the main business strategy of the organization. This will help aligning the HRM strategy with the overall company's objective. This initiative will drive in a long-term resource and recruitment planning and job allocation. Furthermore long-term resource planning will guide the recruitment process to identify the resources with general skills and build them in-house through training and development as per the project requirement.

In my opinion some of the obstacles that might be encountered in introducing these changes and various methods to overcome this situation are: -

Financial implication on the organization in HR team building and training & development. However, these issues can be discussed with the top-management by showing the potential benefits of high-risk reduction currently associated within the organization.

Breaking the indigenous way of functioning of the organization: - this can be achieved by restructuring and introducing a new role based resource structure with defined responsibilities, by the influence of the higher management. Furthermore informal powers currently enjoyed by individuals within the organization can be neutralized.

Establishing retention strategy in the organization through goal-based performance evaluation, training & development and rewards & recognitions: From the outcome of interview conducted this has been revealed that absence of proper evaluation process played a key de-motivating factor for increase in employee attrition.

I would recommend a strong goal-based performance evaluation strategy to be established in the organization with effective horizontal alignment with other critical HR processes like training & development and rewards & recognition as explained in the below diagram.

The diagram also depicts how the performance will be analyzed and effectively directed for future training and development for under-performer employees before they go for the next appraisal cycle. At the same time the employees who are performing well should also be recognized and motivated through individual reward and recognition.

Provide a person his most preferred satisfier. Income is considered as a hygiene factor in the IT industry. Hence they should provide with compensation commensurate with industry norms. As work is being considered as the most motivating factor here, HR managers require taking the initiative to make their jobs as interesting and challenging as possible.

Since supportive family is found to be a very important motivating factor, an organization can do well to foster such supportive family by getting the other members of the family, to identify themselves with the organization. Honoring the employees for their good work and contribution in functions in which the family members may also be invited could create such an environment. One thing that needs to be communicated to the employees that motivation is its own reward. While on a given day, most of the people can't significantly influence what they earn, a lot of things can have an effect on how excited and motivated they feel about their jobs each day. This is something the people in the IT industry are very concerned about.

Finally, HR managers must keep experimenting us to what motivates employees because the person's preferences changes with time. The endeavor of HR managers must be to lift the needs of the employees from lower level to higher level. The people operating at higher level are likely to contribute to the work in an inspired way.

Another key issue identified during the interview is lack of training and development. There is also a gap between proximity to new technologies. This issue is difficult to overcome in this organization because they are working on the same technology for all the projects. The gap is created because the employees' requirement to learn new technology is not aligned with the organizational objective. To overcome this hurdle organization should focus on the training needs, which are not only focused on technology side but also at the same time focused on other managerial skills development. All technical training should be aligned with organizational future business plan and new product development. Human resource management should motivate and encourage the employees to work on this new product and increase their employability.

Building psychological contract through individual rewarding and one-to-one discussion on career progression.

As advocated by David Guest, psychological contract is an understanding between the employee and the employer. It is a mutual agreement towards accomplishing certain task. The psychological contract is a sensitive issue when the trust is broken between both the parties it is difficult to salvage the situation. Another key aspect of building the psychological contract will be individual reward and recognition. The dedicated HRM can bring the change in the organizational citizenship behavior (OCB), which helps strengthening psychological contract between employer and employees. This will also help to increase the organizational performance and deliver more value to the clients by the commitment of the each employee developed through strong psychological contract. As employees are working in a team to deliver a common project objective it is essential to have an environment where each individual can share their knowledge more openly and at the same time learn from the others. This cultural work environment can only be created through a well-structured motivational architecture formed through psychological contract


In order to sum it up, it can be concluded that there is a need to constantly evolve the knowledge for the business like HKI in today's turbulent and unpredicted business environment to create a sustainable competitive advantage. The current standing of the company can be graphed as a curve, which has turned upward, as it has evolved over time, into an administrative yet performing system but is now on its edge towards decline.














Care needs to be taken to see that this trend does not continue. HKI can fall back on its previous experiences, along with all the tools that are at hand now, to try use its last restoration from losing its knowledge workers to competitors in the domestic market - to inspire and motivate all involved to take it back to the position of glory that it had enjoyed just a few years ago and ensuring people growth within the system.

Their Managing Director is ensuring that all moves are targeted towards maximizing profit for the company. Trying to do this, while at the same time trying to keep employees happy and motivated is a very, very tough job. It is fine that the system is generating revenue without a dedicated people management structure. It is to be seen how long the company can sustain competition without making serious changes, especially implementing a strategic human resource management system immediately. Upcoming years will unfold to us what is to be. Nonetheless, we bid Godspeed to HKI.



Current Employees

Do you consider your firm to be a knowledge-based firm?

Do you have any appraisal system?

What is your reward system based on?

Are there any career development opportunities?

What drives you to stay with your current employer?


What was the main reason, which drives you to leave the HKI and join competition?

Was there any thing specific which motivated / de-motivated you during your stay at HKI?

Was there any career progression plan?