The value of HRM to business organisations
Section 1: Literature Review
The approach to the employment of people experienced a major shift from traditional personnel management towards human resource management (HRM) in 1980s, when the deflation and recession crashed into the infrastructure of employment. After that shift, the employees were more likely assumed as valuable assets and a key source of competitive advantage (Marchington and Wilkinson, 2002), and the effective management of ‘resourceful humans’ tended to be seen as a crucial approach to improve organizational performance through ‘the strategic deployment of a highly committed and capable workforce using an array of cultural, structural and personnel techniques’ (Storey,
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If it is not large enough, then it is hard to trigger a change in work performance. As Lawler (1990, cited in Marchington and Wilkinson, 2002, p. 501) suggested that variable pay less than 10 per cent of base salary would be not attractive in PRP scheme.
An organization introduces and develops a PRP programme generally involving these main stages: setting objectives for rewarding employees according to their performance; analyzing the circumstances of organization, including its culture and the type of employees; determining who should be participated in - line managers, team leaders, employees and trade unions; considering methods of performance appraisal; carrying out the plan and assessing its effects. PRP should be schemed and conducted with great care and organizations have to be flexible to adjust the plan timely for constantly changing environment and the feedback from staff (Armstrong, 2002). The following part will describe two organizations conducting PRP scheme.
Section 2: Case Study Description
In this section, two pieces of empirical researches are introduced for the further analysis in next section. The first case of Finbank is regarded as an unsuccessful case of PRP system. And the second case of NHS has been chosen for two reasons: Firstly, though NHS is not exactly a business organization, the PRP of NHS was set by commercial-oriented objectives (Bach, 1994, cited in Dowling and Richardson). Therefore NHS still bears mush resemblance of
Performance based pay plans are becoming increasingly utilized by companies across all industries as they try to improve their productivity while limiting their costs and remaining competitive. An effective performance based plan allows an employer to distribute some of the financial risk and rewards of the business to the employees. The employer can keep base pay compensation below the market average while still offering employees the opportunity to make more money than what is offered at the high end of the market pay range. This leaves the employer less vulnerable to fluctuations in the economic environment by lowering the fixed cost of wages (Miller, 2011).
This essay discusses the role and function of Human Resource Management (HRM) within an organisation. The Harvard and Michigan models have been explained within the essay as they support the analysis of “soft” and “hard” HR approach that managers adapt when applying the HR policies to achieve different organisational strategies like diversification, acquisition and cost reductions. Subsequent section of the essay will examine the link between HRM and its strategies with examples taken from organisations like Harrods’ and Disney and institutes like NHS on how they use HR policies and strategies to achieve their organisational goals.
PRP assists organisations to encourage employees to give greater effort, as well as serves the purpose of attracting employees with a greater skill and higher drive to achieve (Booth and Frank, 1999). It has an effect on recruitment and retention of staff, as it provides an opportunity for people to receive additional income.
You are the HR manager of Brambles, your General Manager has asked you to find a replacement for the Finance Manager who has just handed in their resignation. The Finance department has 5 staff, one being the manager and 4 staff that report to him/her. The Finance Manager reports directly to the General Manager & responsible for all things to do w/finance.
In an era of increasing competitiveness, globalization, economic rationalization, deregulation, technological revolution and changing workforce there is an ever-increasing need for human resource management to be able to capitalize on the special challenges that this changing environment brings. For a company to be able to successfully keep ahead of the competition, human resource management is seen to be a significant contributor.
Having looked at what PRP is and how it is used, I have then chosen to research a number of contrasting opinions on whether it is actually effective and if so which businesses are more suited to the scheme. When looking at motivation in the workplace, the basis for PRP is the rather controversial view that money is a motivator (Nelarine 2001) and a number of researchers have differed in their views on whether PRP really does motivate employees. Although Barnes (2008) suggests that at one level a well designed and managed performance appraisal system should enable operations managers to improve the motivation of individual employees, others have suggested otherwise. Price who believes that pay for performance is
PRP might be considered as a scheme contributing to the creation of a challenging work environment and allowing for career development where individuals are fairly recognized. The term ‘’fair’’ relates to the idea of each employee being rewarded in accordance with the individual efforts made .As such, the system is likely to have a rather positive impact on morale & job satisfaction. However a number of studies have shown signs of negativity towards PRP, mainly based on the way in which the scheme is perceived by employees. Michelle Brown and John S. investigate the problem and make an argument that employee’s perception of PRP is often associated with the common opinion that the scheme is unfair, gives way to ‘’favoritism’’ and is often based on unrealistic goals (reference 8). Formulating an opinion around these arguments, one would suggest that if PRP is perceived by THT employees as being unfair, the introduction of the scheme would lead to decline in morale and job satisfaction. It should be noted here that THT’s current reward system does not bear similar risks as it’s solely based on
Performance related pay (PRP) is a financial rewarding system which is directly associated with the work accomplishment of employees. It seems that the basis of this process is cash or bonus payment: employees will be awarded cash or bonus when they achieve a greater performance. In the late 1980s and early 1990s, the system of payment by performance was widely applied in both private and public sectors in many organizations in the United Kingdom. Brown and Armstrong (1999) claimed that there are more than 50 percent of the UK companies had implemented this method to motivate their employees during that time.
The term Human Resource Strategy is well defined as - “Human Resource management (HRM) is a strategic approach to managing employment relations which emphasises that leverage people 's capabilities is critical to achieving sustainable competitive advantage, this being achieved through a distinctive set of integrated employment policies, programmes and practices.” [ Bratton and Gold,4e,p3]
Abstract: Human Resource Management is fast gaining popularity and its importance is becoming unavoidable, this is due to the fact that Human Resource Management plays a huge role in the growth of any company irrespective of its size. Unfortunately it is yet to achieve global standards or strategy of operation; this can be attributed to the various differences between environmental factors, employment attitudes, cultural
People are the key to business success. However nowadays of business this is often neglected and people are seen to be a necessary expense. A successful business does not just rely on a person’s power instead it involves continuous effective teamwork and communication. Storey (1995) defines that human resource management is an individual 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.
Drawbacks come along with organization PRP benefits. The motivation value of implementing such a scheme is relatively weak. On one side, the added-value systems like profit-sharing involves complicated information and rules and thus employees will feel confused with them. On the other side, the bonus payments are usually available with a delay of several
Current business conditions mandate greater competitive advantage from HR agendas and processes. HR must contribute strategic value to add greater competitive advantage either reactively or proactively. In its strategically reactive mode, HR assumes the existence of a business strategy and adds value by linking HR practices to the business strategy and by managing change. In its strategically proactive mode, HR creates competitive advantage by creating cultures of creativity and innovation, and by linking internal processes and structures with ongoing changes in the marketplace. This article defines and describes one such practice like lean management
Based on Bratton and Gold (2007:55), as applying the resource-based model, managers consider HR as ‘an asset’ which is emphasised when there is an access to ‘advanced technology and other inanimate resources’. Moreover, Barney (1991:99) claims that to sustain the competitive advantage, it is vital for an organisation to be equipped with four characteristics of resources and capabilities: