Human Resource Issues in High Performing Organizations
High-performing organizations are companies that consistently outperform their competitors. Although high levels of performance are due to a number of factors, human-resource policies and procedures are a significant contributor to ongoing success in these organizations. One of the foundations of human-resource management success in high-performing organizations is the objective understanding and definition of the nature of the jobs within the company, based on empirical evidence, and the establishment of hiring, performance appraisal, and other functions on that basis. In addition, high-performing organizations support and empower their workers through continued training to help them acquire even more job-related skills, involvement in organizational decision making, and financial rewards for contributing to the success of the organization.
Keywords Empirical; Feedback; Job Description; Motivation; Pay for Performance; Performance Appraisal
Management: Human Resource Issues in High Performing Organizations
In recent years, significant attention has been given to high-performing organizations — those companies that consistently outperform their competitors — in an attempt to determine what factors contribute to their success. In organizations that produce goods, it is tempting to point to the efficiency of the production line or automation as a factor in performance. However, the outputs of many companies today are not quite so tangible. Even in traditional production facilities, there are many more factors to performance efficiency than having the newest or best equipment. Organizations are made up of people, and human resources are the most important resource in any organization. Therefore, one of the areas that need to be analyzed in determining the factors that contribute to success in high-performance organizations is human-resource management.
Although the fundamental functions of human-resource management — recruitment and placement, training and development, compensation, and employee relations — are the same in every organization, research has found that there are significant differences between human-resource functionality in low-performing organizations and that in high-performing organizations. In high-performing organizations, human-resource departments tend to operate at a higher level: generating more candidates for job openings and screening them more effectively, offering more and better training opportunities for employees, linking pay and other incentives directly with employee performance, and providing a safer working environment for employees at all levels within the organization. Not only do the processes and outcomes of human-resource activities differ in high-performing organizations, so do their goals. In general, in high-performing organizations, human-resource activities are at the heart of the organization's functioning rather than on the periphery, with the goal of maximizing the potential, utilization, and commitment of all employees at all levels in the organization.
As modern organizations were beginning to take shape after the Industrial Revolution, there was a great distinction between the various types of workers in an organization. Business owners and managers were viewed as the driving force behind the organization, with production workers, clerks, secretaries, and others often viewed as easily replaceable entities. To run an organization under this philosophy, the command-and-control model was adopted from the military. However, in the 21st century, this paradigm has changed. In the Information Age, it is recognized that virtually all employees within organizations are highly skilled and can contribute to the effectiveness and performance of the organization. In current thinking among human-resource managers, employees are not easily replaceable entities but rather human capital. This view regarding an organization's employees takes into account an employee's potential within the scope of his or her current tasks, as well as the employee's overall expertise, including his or her knowledge, skills, abilities, training, and education. Employees are no longer viewed merely as bodies needed to fill positions; they are a type of corporate wealth that can be used to further the objectives of the organization in much the same way as financial capital is used. Therefore, employees need to be nurtured and helped to realize their potential. In addition, their contributions need to be recognized and rewarded and their inputs considered in order to help the organization perform at a consistently high level.
Under this philosophy, human-resource departments need to set up policies and procedures that promote a high-performance work system. This means that just as performance and success in the rest of the organization needs to be objectively measurable and evaluated against objective standards, so too must the performance of the activities within the human-resource department itself. Dessler (2005) describes the results of research published in 2001 that compared the human-resource practices in high-performing versus low-performing organizations. A significant difference found between the two types of organizations was the emphasis placed on various functions that encourage high performance. For example, when hiring new employees, high-performing companies were more likely to promote from within (61.46%) than were their low-performing counterparts (34.90%). This difference is due in part to the fact that high-performing organizations tend to groom their employees for advancement. High-performing companies also tend to be systematic about their approach to hiring new employees. Significantly more high-performing organizations based hiring decisions in part on validated selection tests (29.67%) than did low-performing companies (4.26%). High-performing companies were more likely to attract applicants to the job, whether because of their reputation or their recruiting efforts: 36.55 applicants on average in high-performing companies versus 8.24 applicants on average in low-performing companies. On a practical level, what this means is that high-performing companies have a greater applicant pool from which to fill their open jobs and, as a result, are typically more likely to find the best available person for the job (Dessler, 2005).
The impact of human-resource policies on organizational effectiveness and performance does not stop with hiring practices, however. Even when one has hired from within and the person in the new job is familiar with the general practices and culture of the organization, he or she will still need to learn how to perform the tasks required on the new job. Therefore, one of the functions of the human-resource department is to provide training for employees. According to Dessler (2005), high-performing companies gave new employees an average of 116.87 hours of training their first year, while low-performing organizations gave new employees an average of 35.02 hours of training within their first year. Experienced employees were given an average of 72.0 hours of training in high-performing companies but only 13.4 hours of training in low-performing companies. Although training costs can have a significant impact on an organization's budget, it is very important to train employees. Initial training is necessary to teach new employees how to successfully do their new jobs. However, additional training throughout the employee's tenure is also important. Continued training enables employees to acquire the additional skills that will help them grow and make them better able to contribute to the performance of the organization.
Human-resource practices and procedures are important in other aspects of the organization's functioning. In high-performing companies, for example, 95.17% of the employees received a regular performance evaluation, as opposed to only 41.31 percent in low-performing companies. In addition, in the high-performing companies, 51.67% of the employees received performance feedback from multiple sources, compared to only 3.9% in low-performing companies (Dessler, 2005). Such feedback gives employees a better overall picture of how they are doing on the job. This means that employees in high-performing companies have more information about the quality of their performance so that they know how and when to improve.
Encouraging high performance within organizations is not just a matter of prodding the employees to use their knowledge, skills, and abilities in furtherance of the organization's goals. The high-performing organization also recognizes that employees will be motivated to greater performance if they are rewarded for their efforts with something of value. For example, in the high-performing companies, pay increases and incentive pay were tied to performance for 87.27% of the employees; in contrast, only 23.36% of such remuneration was tied to performance in low-performing companies. This means that the employees in the high-performing companies not only know how they are doing against organizational standards and how they can improve; they are also given tangible monetary incentives to motivate them to improve their performance and, by extension, the performance of the organization. This is demonstrated by the fact that 83.56% of employees in high-performing organizations were eligible for incentive pay, while only 27.83% of employees in low-performing organizations were eligible (Dessler, 2005). In addition to monetary incentives, high-performing organizations typically try to offer employees other incentives that will meet their individual needs, such as prestige, opportunities to socialize, or job security.
Such differences play themselves out in the performance of the organization. According to Dessler (2005), high-performing organizations had lower turnover (20.87%) than low-performing organizations (34.09%). Reducing turnover helps not only because of the continuity of having high-skilled workers who know the job but also because it reduces the costs associated with hiring and training replacement workers.
The US General Accounting Office (GAO) has been very involved in analyzing high-performing organizations in an attempt to determine what practices...
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