Impact

of
HR Practices &
Functions
on
Organizational
Effectiveness
 Introduction
◊ The field of human resource (HR) has been rapidly developing in order to
assist companies adapt to a quickly changing environment and
competitive labor market.
◊ Effectiveness with which corporations manage, develop, motivate and
involve the people who work for them is a key determinant of how well
those corporations perform
◊ Organizational performance outcomes are the indicators that reflect the
organizational efficiencies or inefficiencies in terms of corporate image,
competences and financial performance etc.
◊ Employees can be a source of competitive advantage and it is difficult to
imitate. The complex business objectives are difficult to achieve without
developing highly committed and motivated employees who would strive
to contribute to organizational goal
◊ Majority of the domestic firms have started focusing on the HRD rather
than HRM. It could be due to the adoption of a more western
management system in Indian organizations. Such indications imply the
growth of professionalism in the HR field.
 Looking back:
◊ The employment policies implemented throughout the 1990’s were
mainly focused on fulfilling the economic objective of the firm, rather
than developing organization “fit’ for individuals.
◊ Specifically, extensive recruitment, selection & training procedures,
formal information sharing, attitude assessment, job design, grievance
procedures & labor management participation programs & performance
appraisal, promotion & incentive compensation systems that recognize
& reward employee merit have all been widely linked with valued firm-
level outcomes. These policies and procedures have been labeled High
Performance Work Practice by US Department of Labor, 1993
◊ The universalistic approach to HRM was followed which states that
specific HR practices are consistently correlated with organization’s
performance. As a result some of the HR practices are considered to be
superior over the other ones; therefore it is encouraged to adapt these
practices in all organizations.
 Factors which contribute to improving
organizational effectiveness:

Clear Communication to Employees:

◊ There is a significant link between the understanding of organization
goal and organizational performance. There is a high positive link
between shared expectations on organizational performance.
◊ The employee when aware of the business strategy and how it linked to
their performance, had clearly defined work goals, and understood the
basis upon which their job performance was appraised were able to
perform better leading to organizational effectiveness.
 Alignment to Strategy:
◊ The sustainable competitive advantage of any company can be
maintained under the condition that the organization’s design, culture &
people are aligned with its strategy.
◊ The more the HR practices are in place and there exists proper
implementation, the more the HR and HRD managers are competent,
satisfied with the existing HR practices, have sufficiently role clarity in
their job and have no intention to leave the organization
◊ Strong strategic linkage should be developed to create an objective
setting process that links individual objectives to annual business goals
in a clear and articulated manner.
◊ This concept, concludes that human resource practices can help create a
source of sustained competitive advantage, especially when aligned a
firm’s competitive strategy
 Culture:
◊ Organizational culture is defined as including shared meanings, values,
attitudes and belief of its members The more skilled an organization’s
management team is at creating a work culture where employees feel
motivated, the more successful that organization will be.
◊ Variations in cultural values may have a significant impact on employee
turnover and possibly employees' job performance. Culture plays a major
part in determining organizational performance.
◊ Sharma and Aradhana (2002) in their study on corporate culture and high
performance concludes that by developing strong corporate culture,
organizations can finally have control over performance and high levels of
commitment and enthusiasm of the employees
◊ The Harvard model of HRM implies that desired outcomes may drive the
choice of appropriate work cultures. Culture change can thus be managed by
the choice of appropriate HRM policies and practices, in the realm of
employee influence, HR flow, reward systems and work systems,
streamlining its culture and enabling more flexibility in its structures.
 Selective Hiring:
◊ This is seen as an effective way to achieve ‘human capital advantage’ by
recruiting outstanding people and ‘capturing a stock of exceptional
human talent’ as a source of sustained competitive advantage.
◊ Even though the notion that employers want to recruit the best people
available is hardly new, this is now-a-days more likely to be
systematized through the use of sophisticated selection techniques.
◊ There are also wider worries that selective hiring, especially when it
focuses on how well new recruits might fit with the prevailing
organizational culture, can lead to under-represented groups being
excluded and excessive ‘cloning’ of employees which can be problematic
if there are changes in business objectives 
 Joint Goal Setting:
◊ In most companies, joint objective setting was the foundation of a
performance management framework that ensured objectives were
flexed to meet the changing needs of the business strategy. The
processes were well documented, systematically rolled-out, supported
by trained managers, and the quality was reviewed.
◊ A crucial element of the embedding of the process is that in companies
the objective-setting process should be clear, participatory, flexible and
communicated well and as a consequence would become part of the way
in which individuals saw the company doing business.
◊ It is part of the fabric of the culture and an important management
discipline.
 Team Orientation:
◊ There is strong link between team orientation and organizational
performance. Teams outperform individuals, especially when
performance requires multiple skills, judgment and experience.
◊ Employees who work in teams generally tend to report higher levels of
satisfaction and are more motivated than their counterparts who work
under more ‘traditional’ regime
◊ It is to be noted team-working, which appear superficially attractive may
not offer universal benefits and empowerment in all organizations, but
actually lead to work intensification and more insidious forms of 
control; in other words, quite different and more worrying
interpretations from that which is portrayed generally.
 Training needs:
Focus on both short term and long term
◊ Training is an essential component of high-performance work systems.
Employees believed that being faced with challenging jobs had played
the most significant role in developing their work performance.
◊ Training that focused on short-term business needs was seen as a key
aspect of their ability to create the flexible and multi-skilled workforce
crucial to delivering both short and longer-term business performance.
◊ Firms with superior training programs are likely to have lower staff
turnover than organizations that neglect staff development.
◊ The quality of training, both in terms of its focus and its delivery, is
clearly just as important, if not more so, than a simple count of the
amount provided.
◊ A lot of companies now try to take a general look at accepting the
initiative of learning at both individual and organizational levels as a
major source of competitive advantage.
◊ A key lever is the ability to maximize the performance of knowledge
workers and thus begin to build a learning organization. Knowledge and
intellectual capital are becoming increasingly competitive global
markets. Indian firms are no exception. A rough guide is that for every
Rs 10 of expenditure invested in new or updated technology, Rs 1 should
be spent on training & development.
◊ Learning has been looked upon as the only strategy which can be used to
catch up with the growing changes in technology, world markets,
customer expectations and competition
◊ Employees will work for the benefit of the organization if they feel that
the training and development embarked upon is also going to be of
benefit to them
 Compensation and Benefits:
◊ Compensation is the major element to influence organization’s staff. When
workers are properly and fairly compensated, the more they will perform
better at the same time, organizational performance will increase
◊ There is a strong link between the planned awards and organizational
performance. Planned awards are clearly made aware to the employees, thus
initiating hard work in order to achieve those awards.
◊ Organizations are on the constant move to link awards with performance
and the results have been significant. This states that money is still a great
motivating factor for the employees followed by performance based
promotions.
◊ In addition, rewards should reflect different levels of contribution and either
be paid along with basic rates of pay or provided through profit sharing or
share-ownership schemes
◊ Studies have also shown non-monetary incentives are better motivator than
monetary incentives for middle and top management.
 Career Management System:
◊ The employees view training programs as the most important for their
career development, followed by formalized career plan initiated by the
company.
◊ We also see high correlation between awards and reward and
performance. This states that money is still a great motivating factor for
the employees followed by performance based promotions.
◊ If we analyze the correlation between HR practices, it shows that career
management system and awards and rewards are highly correlated with
one another, meaning thereby, if both of them exists in the organization
the performance can increased manifold. These two HR practices can
also be termed as high performing work practices in an organization
Encouraging participation & Motivating
Employees
Critical to achieving such an outcome is an environment that allows
employees to experiment with new concepts and ideas without
being exposed to risk.
A) Job Enrichment & Job Enlargement:
◊ There is a very high positive link of job enrichment & job
enlargement on organizational efficiency. Job enrichment either
horizontal or vertical is a great motivating factor and hence
improves performance.
◊ This may be one of the most challenging areas of human resource
specialists, since there are many factors to be taken into account
when designing a job.
B) Initiation and Creativity:
◊ Empowerment of employees increases initiation and creativity
among the workers. In knowledge economy, the human resource
has been recognized as a strategic tool, essential to organizational
profitability and sustainability
C) Decision Making:
◊ Empowerment and the opportunities to make certain decisions in
regards to their job should be allowed. The employees also demand for
better working conditions and that supervisors and leadership should be
more cordial. Giving employees the free hand to make decisions
concerning their job functions brings about motivation and job
satisfaction.

D) Sharing information: There are two reasons why this practice is

essential
◊ First, open communications about financial performance, strategy, and
operational measures conveys a symbolic and substantive message that
employees are trusted as well as reducing the role of the grapevine in
spreading rumors.
◊ Second, if team working is to be successful and employees are to be
encouraged to offer ideas, it is essential that they have information upon
which to base their suggestions and know something about the financial
context in which their ideas are to be reviewed.
◊ The notion of information sharing or employee involvement appears in
one form or another in just about every description of, or prescription
for, ‘best practice’ or high-commitment management.
Best Practices in HRM:
◊ In recent years there has been a considerable degree of interest in
the notion of ‘BEST PRACTICE’. This has resulted in assertions that
a particular bundle of HR practices can increase profits irrespective
of organizational, industrial, or national context.
◊ The concept of “best” is highly subjective and non specific. “Best
practice” is not a set of discrete actions rather a cohesive and holistic
approach to organizational management and practicing managers.
◊ There is no single best practice to which all organization should
aspire. Rather, the study shows that each firm has a distinctive HR
system that represents core competencies required for the survival
and sustainability for that particular organization. “Best practice” in
HR is subjective and transitory. What is best for one company may
not be best for another. What are best last month may not be best
for today.
Conclusion
◊ The practices and policies employed by the organization and its effective
implementation have a reflection on the organizational efficiencies or
inefficiencies. How firms manage their employees is crucial to their success.
◊ It is not sufficient to monitor the existence of HR policies and strategies in
organizations. This only tells us what is intended. It is what happens in
practice that determines how organizations are affected by people
management practices.
◊ In both, theoretical literature and emerging conventional wisdom among
human resource professionals there is a growing consensus that
organizational human resource policies can, if properly configured, provide
a direct and economically significant contribution to firm performance.
◊ It is becoming increasingly important for HR specialists to demonstrate that
they contribute to organizational performance as HR specialist focus more
closely on integrating HR and corporate strategy. The synergy and
congruence among HRM practices have an important impact on business
performance. Therefore, it is important to examine the HR practices as a
whole rather than individual HR practices.
 References:
◊ NATIONAL RESEARCH PAPERS:
1. The impact of human resource management practices on organisational performance: 8th
International Conference in HRD Research and Practice, Oxford, 27-29 June 2007 # 204
https://www.ufhrd.co.uk/wordpress/wp-content/uploads/2008/06/lall-204-wp.pdf
2. Impact of people management on organizational performance: a study of Indian managers
https://www.ufhrd.co.uk/wordpress/wp-content/uploads/2008/06/604khandekar.pdf

◊ INTERNATIONAL RESEARCH PAPERS:

1. 'Best practice' human resource management: perfect opportunity or dangerous illusion:
Int. J. of Human Resource Management 11:6 December 2000 1104–1124
https
://www.academia.edu/34768322/Best_practice_human_resource_management_perfect_
opportunity_or_dangerous_illusion
 
2. The Impact of Human Resource Management Practices on Organizational Performance: A
Case of Private Banks in North Cyprus: International Journal of Business and Social
Science Vol. 6, No. 6; June 2015
http://ijbssnet.com/journals/Vol_6_No_6_June_2015/24.pdf