In an era of rapid globalization, environmental change, and intense competition for providing innovative products and services, performance has become a standard frame for enterprises all over the world. As competing in an effective manner has become a priority, firms are required to improve their performance. Today, one of the major organizational goals is performance. Owing to the goal, various research efforts in the field of human resource management have been inclined at guiding the understanding of the linkage between HRM and performance.
Much of the empirical studies on the enhanced value of HRM provide evidence for the significance of HRM in the high-performance label. However, Wall and Wood (2005) challenge the assumption for linkage between HRM practices and improved performance level of the organization stating that the linkage should be treated with caution. The objective of the paper is to critically analyze the statement of Wall and Wood (2005) through analysis of the role of HR department and HR practices and discussion on the linkage between organizational performance and HRM practices. The analysis is aimed to understand whether a linkage between the two is always direct or not. This article does not include the study of specific organizational settings that are unique to every organization, such as organizational culture, policies, and values.
Researchers in the field of HRM have devoted crucial time and efforts to demonstrate an understanding of the strong linkage between ways in which people are handled, particularly through the practices associated with HRM, and the organizational performance. However, no consensus exists on the nature of HRM, which implies that no fixed list or unanimously agreed view exists on HR systems and practices that can that could be used to define or measure HRM. One of the key roles of HR department in an organization is to create the best fit between organizational strategies and HR activities.
However, authors present different arguments for the role of HRM in organization. One argument revolves around the distinction between the best and the so-called best practice. Another argument is related to the differentiation of HRM towards specific groups of employees. The third argument revolves around a clear distinction present between intended HR practices that are designed at the strategic level, actual HR practices that are implemented by line managers, and perceived HR practices that employees of the organization perceive.
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The four major assignment practices which were assigned to students revolving around most of the strategic HRM programmes of HR department are recruitment and selection assignment help, training and development assignment help, performance appraisal assignment help and management assignment help, and contingent pay and reward schemes assignment help. These practices not only reflect the primary objectives of the majority of programmes in HRM, but they also represent the combination of practices that are in correspondence to the so-called High Performance Work Systems. They are also parallel to some of crucial practices generally associated with AMO (Ability-Motivation-Opportunity) theory. Thus, a relationship exists between way of implementing HRM and exploring the link between HRM and performance.
In the context of understanding HRM-performance linkage, two different approaches exist for confirming the significance and role of human resources and its management on creating an influence on organizational value. The first approach reflects the existence of a direct relationship between HRM practices and high-level organizational performance. The second approach stresses on indirect relationship between HRM practices and high-level organizational performance.
As per the Guest (1997) model, the expectancy theory of motivation is one of the possible bases for development of a rationale between the links of HR-Performance. It proposes that at the individual level, performance is dependent on holding necessary skills, high level of motivation, and an appropriate understanding of the role. The proposal is a motive to select such HRM practices that can encourage role structure, motivation, and skills. Only these HRM practices influence HRM outcomes, which consequently results in financial outcomes.
As identified in the research by Savaneviciene and Stankeviciute (2010), Becker et al model (1997) links mediating variables, such as motivation, employee’s skills and job design to HR related outcomes such as creativity and productivity. These outcomes lead to distal outcomes such as improved operations, performance, profits and growth. Purcell et al (2003) gave people-performance framework that focuses on abilities of employees, motivations, and opportunities for participation. Wright and Nishi (2006) model includes intended HR practices, perceived HR practices, and reactions and performance of employees.
Savaneviciene and Stankeviciute (2010) identify a similarity among all these models by stating a common basis of all models in a linear causal process. Earliest models only proposed a fit between strategy of the firm and HR practices in a generic outcome named performance of the firm. The four models added a layer of complexity to every variables leading to HR outcomes and distal outcomes.
On the other hand, Caliskan (2010) presents a positive relationship between the greater adoption of HR practices and performance of the business labelled in high performance. The author argues that the strategic human resource management is highly concerned with the creation of a linkage between the overall strategic aims and objectives of the organization, and the human resource strategy and implementation. As direct linkage is present, it enables the HR manager to design HR programmes that can bring forth high yielding operational results for attaining higher organizational performance.
Trehan and Setia (2014) shed light on the concerned linkage in the context of region. They state that differences are present in the way linkage works in the US, UK, and the Asian context. By taking the example of Indian context, authors say that the HR system is going to contribute to the success of the firm to address competition only when it is introduced in the organization as the integrated package. It means that a bundle of HR practices are required to be introduced that should fit into the specific context of the concerned organization. A positive relation has been derived between the HRM practices of selected organizations, such as LG, Pantaloons India Ltd, Maruti Udyog Ltd, Tata AIG General Insurance, etc., and variables of organizational culture.
Deb (2013) emphasizes on significance of a strong internal fit among HR practices for attaining higher effective performance. High performance work practices include self-managed teams, employment security, selective hiring, and high compensation contingent on performance, sharing information, reduction of status differentials, and training.
Machado (2014) argues that HRM practices may prove to be essential for enhanced performance, but they on their own are not sufficient. A move has been observed from best practices HRM to perspective of organizational processes. The role of line managers have emerged as critical as they act as the touch-points between the intended HR practice and the employee acting as the recipient.
Truss, Mankin and Kelliher (2012) present the linkage of HR practices and firm performance through the case study. The authors present an organizational example through the case of Pace Inc., a set-top manufacturer. In 2006, the company faced the threat of bankruptcy with debt of 30 million pounds and the leadership crisis. However, by 2009, the company announced revenues of 1.1 billion, and also won the CIPD People Management Award. The reason for such change was focus of the company on performance management scheme, which is one of the elements of high performance work systems. Change in the performance metrics and their rolling out across the entire workforce changed the outlook of entire workforce. The increase in the financial performance also improved the employee satisfaction as an individual unit.
A relationship exists between the HRM practices and the performance of the firm. However, it cannot be said that the relationship is always direct. High Performance Work Practices are associated with the way the organization delivers them and employees perceive them. A causal linkage is present between HR practices and the performance of the firm, when implied in the label of high performance. Mediating variables in models for HR-Performance linkage lead to various HR outcomes that can indirectly contribute to dismal outcomes in terms of firm performance. Organizational psychology plays a crucial role to understand the congruence between perceptions of employees and intentions of the management. Thus, it can be concluded that causal linkage exists between high-level performance of the firm and the high performance work practices.
HRM plays a significant role in an organization. SHRM suggests that a strong internal fit is required to be present between HRM practices and business strategy and objectives. Specific organizational contexts, such as organizational cultures need to be studied for better understanding the linkage between HR practices and high-level firm performance.
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