Human resource management has become a prodigiously, popular organizational function. Over the years, organizations have appreciated HRM’s importance as a major driver towards achieving organizational goals. The following sections explore how human resource processes support organizational performance.
Main Organizational Objectives that HR is responsible for Delivering. Human resource objectives are influenced by organizational, social, and individual goals. As such, HR goals tend to be multi-functional. However, the primary goal of HRM is to ensure the availability of a talented, motivated, and competent workforce that meets organizational needs1. The main organizational objectives that HR is responsible for delivering as a way of achieving organizational performance include driving desirable organizational structure and maintaining a healthy working relationship with employees, helping organizations achieve organizational goals by ensuring proper utilization of human capital, facilitating growth opportunities for both individual and group development, integrating and aligning individual goals to organizational objectives, and developing healthy relationships between employees and management.
How HR Functions have evolved in Contemporary Organizations. The contemporary organization is operating in an environment characterized by rapidly changing technology, increasing uncertainty, changing demographics, changing customer expectations, and a more mobile workforce. Historically, businesses could be seen as organized efforts to produce and sell with the sole purpose of making profits. Today, although the primary goal remains the same, to make profits, organizations have to function amid many uncertainties, complex technology, increasing expectations from society, and changing environments2. Similarly, organizations now focus on reinforcing competitive advantage and fending off competitors. Over the last 50 years, HR has evolved from being a personnel manager to a department with responsibilities ranging from essential procedures such as payroll to strategic elements.
Both internal and external forces are moving human resources towards a more strategic role in organizations. For instance, the HR department is tasked with taking a proactive role in planning skills needed, ensuring top management succession, and thinking about how best to utilize the available resources optimally. All these responsibilities are geared towards helping organizations achieve short-term and long-term strategic objectives2. Traditionally, HR was regarded as a reactive, administrative, welfare, and back-office function that was often considered bureaucratic. Similarly, HR managers were feared as people whose key mandate was to ‘acquire and fire’ employees. However, the paradigm has shifted towards a more proactive function placed at the heart of every organization. The human resource department manages significant changes in organizations while at the same time adding value to organizational culture and processes. HR will continue to evolve with advancing technology, and HR managers will keep moving from tactical and operational-based functions towards more strategic roles.
Justification for Managing HR in a Professional, Ethical, and Just Manner. HR professionals are expected to exhibit high levels of professionalism, the highest standards of ethical conduct, and fairness in all their activities. Most employees look up to the human resource management team as role models with respect for professionalism and ethical conduct. HR professionals should professionally carry themselves for various reasons. First, there is a need to build credibility, strategic importance, and respect within organizations, society, and business communities in which they operate1. Secondly, acting professionally influences the workplace and other practices, such as recruitment, positively. Further, acting professionally encourages social and professional responsibility among the employees hence assisting organizations in achieving business goals and objectives.
The HR function needs to take an ethical approach in its actions. Treating employees ethically is an essential element in maximizing organizations’ long-term value. HR professionals are required to exhibit individual leadership by maintaining the highest levels of ethical standards. The justification for the HR team stems from two major reasons; first, HR professionals need to set standards and be good examples to others. Secondly, acting ethically is the only way to increase credibility and earn trust and respect among the employees. Acting ethically and sticking to fairness and just treatment of all employees always go hand in hand4. Typically, HR professionals are needed to act in a just and fair manner to encourage individuals and groups to reach their full potential in an organization. Once employees feel treated equally, fairly, and justly, they get motivated, enabling them to achieve organizational objectives.
Ways in which HR Objectives are Delivered in Organizations. The primary purpose of the HR function in an organization is the effective management of employees and aligning performance issues to achieve organizational objectives. However, organizations achieve this goal by applying different models depending on factors such as costs involved, size of the organization, and the intended goals. In a typical organization, employees have their own line managers to whom they report. Such managers interact with employees daily. As a result, staff will most likely reach out to their line managers in case of concerns or questions. In such situations, HR professionals must work closely with the line managers to manage people issues across the organization effectively and consistently2. This approach to HR management ensures that employees achieve organization-wide objectives and individual goals, development, and growth.
The human resources shared services model, as proposed by David Ulrich, has been adopted by many organizations as a way of delivering HR objectives. Typically, the ‘shared services’ approach entails centralizing the services across the different parts of the organization to cut costs, increase customer satisfaction, and improve productivity. Tasks should be organized in a way that makes the best use of resources and talent.4 Often referred to as the ‘three-legged stool’, the model consists of three key areas: centers of excellence or expertise, shared service area, and business partners. The centers of excellence comprised HR specialists who offer companywide services to business units and executives on request. They undertake functions such as staffing, compensation, and labor relations. Service centers offer HR-related transactional and administrative tasks that other business partners can access. Organizations can also deliver HR objectives through other models, such as outsourcing and consultancy.
How HR Function Varies between Organizations in Different Sectors. Different types of organizations, depending on their size and objectives, organize their HR functions differently. Due to the nature of strategic goals adopted, some HR practices are usually better than others and as a result, organizations are forced to implement ‘high-performance practices’. Over the recent years, organizations in the public, private, and not-for-profit sectors have witnessed significant changes that have created the need to continually improve their processes, including the HR function. As a result, the HR functions tend to be organized differently between all these three sectors. Table 1 below compares HR functions in the government sector, a national private company, and voluntary organizations.
|Public Authority||National Private Company||Voluntary Organization|
|In the government sector, HR functions are focused on compliance and accountability||HR functions require a deep understanding of the business to ensure that HR goals are properly aligned with organizational objectives.||The key focus is on funding since most of the funding comes from charities and volunteers.|
|Documentation is a key aspect of HR function due to the bureaucratic nature of government institutions.||Private organizations tend to be lean, with operations being decentralized. However, big national private companies can be bureaucratic.||Most voluntary organizations do not place a lot of emphasis on performance since they heavily rely on volunteers who may not be trained.|
Criteria Used to Evaluate the Contribution of HR Function. Since HR managers are now being held accountable for contributing to measurable strategic organizational objectives, it is imperative to put in place a robust system for evaluating their activities. An HR manager’s goal should be to create employment relationships in which employees believe that their greatest satisfaction and success emanate from actively seeking new ways of contributing to organizational success. Measurement of the HR function towards organizational success should be done at the individual and group levels. While many indicators tend to be common and more useful than others for many organizations, there is no ‘one-size-fits-all approach when measuring the success of HR functions. Rather, evaluation models and tools are informed by different factors, such as organizational size and complexity. Therefore, a business needs to determine and use an evaluation tool that best fits its circumstances. The most commonly used tools in the evaluation of HR function include; benchmarking, ROI, the balanced scorecard and HR dashboard, HR audits, and staff surveys.
Benchmarking. Benchmarking is a relatively new approach that organizations use to evaluate HR performance. Organizations measure their practices and processes against key competitors with the goal of improving performance. Similarly, HR professionals can also compare their processes and policies against other organizations not necessarily in the same industry. Such benchmarks allow companies to measure their performance against world-class or ‘ideal’ HR standards.
Return on Investment. ROI is used to measure the efficiency of an investment. In HR functions, the net monetary benefits of employee programs are divided by the program cost and expressed as a percentage. ROI measures the value of employees compared to their costs. HR managers, therefore, calculate the staff costs, including salaries, benefits, remunerations, and pension schemes for a certain period and then deduct from the revenue for the same period. The net employee benefits is then divided by staffing costs and expressed as a percentage. ROI gives an insight to managers on the return for every single dollar invested in employees, hence enabling HR professionals to make better decisions.
The Balanced Scorecard and HR Dashboard. The BSC focuses on four key business areas; that is, financial, internal processes, learning and growth, and customer. The scorecard takes a holistic approach in evaluating whether the HR metrics are being achieved against the company’s strategic objectives. Every metric result is scored against the desired objective. On the other hand, an HR dashboard is an analytic tool that displays key HR metrics using data visualizations. The dashboard shows how HR professionals are performing against performance indicators interactively.
HR Audits: An HR audit can take a comparative or compliance approach. The comparative approach entails comparing an organization with another firm to uncover areas that are not performing well. On the other hand, the compliance approach involves sampling some elements of the HR system to look out for deviations from company policies and procedures, or laws.1 The HR function can also be evaluated using statistics on key performance indicators, such as the number of job applications, new recruits, employee turnover, disciplinary statistics, training days delivered, and employee grievances launched. Such data informs the organization on whether the HR function is achieving its objectives. For instance, high employee turnover, very few training days, a high number of grievances, and very few job applications indicate that the HR function is not performing well.
Staff Surveys. Staff surveys can also be conducted to evaluate the HR climate in an organization. The human resource climate has a huge impact on employee motivation, morale, job satisfaction, and ultimately performance. Staff surveys act as an important medium through which organizations can measure the general HR climate. Employees are asked to answer questions addressing different HR-related issues. Data from the surveys are analyzed, and depending on the scores, a determination can be made as to whether the function is achieving its objectives.
HR Metrics and KPIs. HR functions can also be evaluated using key performance indicators. The KPIs are evaluated periodically, such as after every six months or annually.2 Some important KPIs used to evaluate the HR function include job design and grading, organizational design, recruitment, and selection, change management, termination of employment, conditions of employment, employee support, pay delivery arrangements, grievance processing, work practices, and employee development. Additionally, important HR metrics, such as employee satisfaction index, ROI, salary competitiveness ratio, absenteeism rate, average turnover, cost per hire, attrition rate, acceptance rate, training cost per employee, internal job hires, internal promotion rate, and termination rates can also be used to measure HR performance.
Key Messages from the Report. The article evaluates the relationship between employee engagement and positive business outcomes by analyzing three organizations: 3M, Infosys, and Schlumberger. According to the article, engaged employees are associated with many positive organizational outcomes such as increased innovation and lower levels of absenteeism. To gauge the importance of employee engagement in organizational performance, 3M looks for the relationship between engaged employees and positive business outcomes, key among them being innovation. Owing to the fact that 3M relies heavily on innovations to drive its business, the company has been able to correlate high levels of job satisfaction with lower levels of absenteeism. At Infosys, measurement efforts have demonstrated a correlation between employee engagement and customer satisfaction. At Schlumberger, a decline in service quality is often echoed back to reduced employee motivation and deterioration in management engagement
Why the Article is Convincing. The results presented in the study are convincing for various reasons. For instance, the article highlights that there is quite extensive evidence indicating the benefits of employee engagement in achieving organizational goals. Similarly, the article explains how a study on a service-profit chain has connected employee satisfaction levels to organizational profitability and customer satisfaction. The results of the study are clearly in agreement with outcomes from the study from many other scholars, who all conclude that there is a direct link between good HR practices and organizational performance4. Human resource managers are tasked with creating human capital, which acts as a great asset that increases productivity and competitiveness. Since every organization is comprised of people, acquiring the right talent, developing their skills, and motivating them to achieve organizational objectives are critical.3 By highlighting how best-practice organizations link performance and employee engagement, the results from the study are deemed credible.
How High-Performance Working and Investment in People Impact on Organizational Performance. High-Performance Working practices entail a bundle of HRM practices designed to promote employee motivation, involvement, and skills to enable an organization to gain sustainable competitive advantage. HPW systems foster an environment where employees engage in decision-making processes that have a real impact on organization-wide objectives. Typically, HPW systems are designed to promote employee knowledge, commitment, and motivation. High-performance work has been identified as a key feature in strategic human resource management that enables organizations to become more effective. Organizations of today are operating in highly competitive business environments. As a result, developing a competitive advantage is seen as one way through which organizations can succeed. HPW promotes employee innovation, motivation, and skill development, thus enabling them to help the organization create a much-needed competitive advantage. Ultimately, this will lead to the realization of organizational goals.
Organizations that succeed in achieving their organizational goals understand the importance of investing in HR and efficiently leveraging it to generate positive outcomes. Investing in human capital development leads to increased employee satisfaction, improved retention rates, developing employee engagement, improved ROI, and fosters greater company culture. All these results have been proved to have a positive impact on organizational performance.