Human Resource Management and sustainable organisational growth
Human Resource Management and sustainable organisational growth
Human Resource Management and sustainable organisational growth
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<strong>Human</strong> <strong>Resource</strong> <strong>Management</strong><br />
<strong>and</strong> <strong>sustainable</strong> <strong>organisational</strong><br />
<strong>growth</strong><br />
Wolfgang Mayrhofer, o. Univ.-Prof. Dr.<br />
WU (Vienna University of Economics <strong>and</strong> Business)
Basic messages<br />
Research clearly identifies major contributions<br />
of HRM to organizational performance<br />
o Aligning HR with <strong>organisational</strong> mission <strong>and</strong> goals<br />
o Bridging between various stakeholders<br />
o HR practices<br />
• Competency profile of human resources<br />
• Performance related activities<br />
Caveat: no one-size fits all, but cultural <strong>and</strong><br />
institutional variation<br />
These contributions ti also have <strong>sustainable</strong><br />
character as they target the ‘deep structure’ of<br />
the organisation<br />
2<br />
W. MAYRHOFER<br />
ivm@Vilnius 2009
Conceptualising the<br />
Conceptualising the<br />
HRM-performance-link
Framework of <strong>Human</strong><br />
<strong>Resource</strong> Mangement (HRM)<br />
Stakeholder<br />
interests<br />
e.g., shareholder,<br />
banks, managers<br />
Situational<br />
Factors<br />
eg e.g., jobmarket<br />
market,<br />
laws, workforce<br />
HR strategy<br />
HR flow<br />
•Recruit <strong>and</strong> select<br />
•Train <strong>and</strong> develop<br />
Assessment<br />
Reward systems<br />
Employee influence<br />
Work systems<br />
HR outcome:<br />
4C‘s<br />
Commitment<br />
Competence<br />
Congruence<br />
Cost-effectiveness<br />
Societal<br />
well-being<br />
HR Practices<br />
Long-term consequences<br />
Organisational<br />
effectiveness<br />
Individual<br />
well-being<br />
4<br />
W. MAYRHOFER<br />
based on Beer/Spector/Lawrence/Mills/Walton 1984
What kind of practices?<br />
Basic perspectives<br />
Universalistic view<br />
o Universal best practices exist<br />
o Additive influence on success<br />
o Example: best practice<br />
Contingency view<br />
o Link between HR practices <strong>and</strong> performance is influenced by<br />
contingency factors<br />
o Major contingency factor: <strong>organisational</strong> strategy<br />
o Example: strategy-fit<br />
Configurational view<br />
o Combination of factors – more HR internal<br />
o Emphasises sets of compatible HR practices<br />
o the set has more influence than single measures<br />
o Example: bundle approach<br />
5 W. MAYRHOFER<br />
ivm@Vilnius 2009
Core contributions of HRM to<br />
<strong>sustainable</strong> <strong>organisational</strong><br />
<strong>growth</strong>
Core contributions of HRM<br />
Aligning HR <strong>and</strong> <strong>organisational</strong> mission <strong>and</strong><br />
goals<br />
o Basis for all practices<br />
o Cultural <strong>and</strong> cognitive backbone<br />
Bridging between various stakeholders<br />
o Various stakeholders speak different ‘languages’<br />
o Translation as a core competency of HRM<br />
Specific (bundles of) HR practices targeting…<br />
o Competency profile<br />
o Performance incentives<br />
7 W. MAYRHOFER<br />
ivm@Vilnius 2009
Aligning HR with <strong>organisational</strong><br />
mission <strong>and</strong> goals<br />
8<br />
W. MAYRHOFER
Importance of aligning HR<br />
with mission <strong>and</strong> goals<br />
Alignment<br />
o Provides orientation in unclear situations<br />
o Helps to coordinate individual efforts<br />
Core characteristic of the switch from personnel<br />
to human resource management<br />
Expression of the integration of HRM into the<br />
overall organizational processes<br />
Emphasis role of HRM as – sometimes<br />
important – player<br />
9 W. MAYRHOFER<br />
ivm@Vilnius 2009
Written HR strategies<br />
(Cranet Executive Report 2005)<br />
90<br />
80<br />
70<br />
60<br />
EU Non-EU Other<br />
Yes, written<br />
Yes, unwritten<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
10 W. MAYRHOFER<br />
ivm@Vilnius 2009
Bridging between stakeholders<br />
11<br />
W. MAYRHOFER
Who are HRM stakeholders?<br />
all single or collective actors who have an<br />
interest in the HR process <strong>and</strong> outcome – e.g.<br />
o capital owners, management, ...<br />
o employees, their families, ...<br />
o government, public, ...<br />
HRM stakeholders<br />
belong to different<br />
societal subsystems with<br />
specific core codes (‚languages languages‘)<br />
Members of subsystems<br />
speak different languages<br />
HR<br />
Politics<br />
12 W. MAYRHOFER<br />
ivm@Vilnius 2009
HRM stakeholders <strong>and</strong> their<br />
language<br />
<strong>Management</strong>, capital owners… - economic system<br />
o<br />
o<br />
Language g of money<br />
Ultimate measure: Profit(ability), efficiency, …<br />
Employees, their families … - family system<br />
o<br />
o<br />
Language of love<br />
Ultimate measure: affection, well-being, personal<br />
<strong>growth</strong><br />
Government, local authorities, … - political system<br />
o<br />
o<br />
Language g of power<br />
Ultimate measure: re-election, broadening scope of<br />
incluence<br />
13 W. MAYRHOFER<br />
ivm@Vilnius 2009
Good HRM <strong>and</strong> stakeholder<br />
interests<br />
fulfills core dem<strong>and</strong>s of all relevant stakeholders <strong>and</strong><br />
provides translations<br />
HR<br />
Politics<br />
e.g., personnel development, compensation<br />
systems, collective bargaining<br />
14 W. MAYRHOFER<br />
ivm@Vilnius 2009<br />
Politics
Primary system of reference:<br />
business<br />
HRM has to orientate itself towards ONE<br />
primary system of reference <strong>and</strong> ONE<br />
mothertongue – why?<br />
o Identity<br />
o Acceptance<br />
o Contribution to <strong>organisational</strong> performance<br />
all other systems are of lower importance<br />
15 W. MAYRHOFER<br />
ivm@Vilnius 2009
Business oriented HRM<br />
operates along the dominant logic of business,<br />
i.e. primacy of economic rationality<br />
HR<br />
16 W. MAYRHOFER<br />
Politics<br />
ivm@Vilnius 2009
Arguments for the primacy of<br />
business logic for HRM<br />
Kind of argument<br />
Level Empirical Normative<br />
personal, subjective tendency moral duty<br />
action<br />
towards profit (‚ethos of the<br />
oriented<br />
systemic<br />
mechanism<br />
(‚motive‘)<br />
objective necessity<br />
(‚forced by the rules<br />
of the field‘)<br />
entrepreneur‘)<br />
rule of governance<br />
(‚profit principle‘)<br />
modified from: Ulrich 1998: 399<br />
17 W. MAYRHOFER<br />
ivm@Vilnius 2009
Do non-economic factors play<br />
any role in business oriented<br />
HRM?<br />
Yes, definitely<br />
many examples for the importance of<br />
‚christian‘, ‚human‘‚ ethical‘, etc. aspects<br />
Crucial, though not conveniant role<br />
Business oriented HRM<br />
o partly builds bridges<br />
to other stakeholders<br />
o transforms these<br />
dem<strong>and</strong>s, eg e.g. fulfillment,<br />
joy, safety etc. into the<br />
dominating economic logic<br />
HR<br />
Politics<br />
i<br />
18 W. MAYRHOFER<br />
ivm@Vilnius 2009
Are there any good arguments<br />
for such an HRM orientation?<br />
instrumentalist approach<br />
o „Sound ethics is good business in the long run.“<br />
o Including non-economic aspects is an important success<br />
factor<br />
o e.g., Outplacement, environmental issues<br />
caritative approach<br />
o „Only if you make profits you can spend money for<br />
good purposes.“ (Schneider 1990: 869)<br />
o economic orientation is the basis for satisfying lower<br />
order stakeholders s in a second step<br />
o e.g., hardship bonus in expatriation; additional<br />
payments for dirty or loud working conditions<br />
19 W. MAYRHOFER<br />
ivm@Vilnius 2009
Are there any good arguments<br />
for such an HRM orientation?<br />
(cont‘d)<br />
corrective approach<br />
o „Profit principle <strong>and</strong> business ethics have ... the<br />
relationship of rule <strong>and</strong> exception.“<br />
(Steinmann/Oppenrieder 1985:174)<br />
o non-economic measures es may cost some money <strong>and</strong> are<br />
justified under certain circumstances<br />
o e.g., g, employment of h<strong>and</strong>icapped persons under<br />
specific circumstances<br />
20 W. MAYRHOFER<br />
ivm@Vilnius 2009
Bundles of HRM practices<br />
21<br />
W. MAYRHOFER
Empirical evidence<br />
Extensive literature<br />
Meta-analysis analysis of 61 empirical studies from<br />
different countries (Gmür/Schwerdt 2005)<br />
o HR activities examined<br />
• Level of pay, portion of variable pay<br />
• Training effort, multidisciplinary training<br />
• Recruitment t effort<br />
• Performance evaluation<br />
• Participation<br />
• Support of work-life-balance<br />
o A number of clear effects<br />
22 W. MAYRHOFER<br />
ivm@Vilnius 2009
Meta-analysis: link between<br />
HR <strong>and</strong> firm performance<br />
(Gmür/Schwerdt 2005)<br />
Stable<br />
Unclear – small<br />
# of studies<br />
Unclear – heterogenous<br />
effects<br />
Medium<br />
effect<br />
(r>.2)<br />
Investment into<br />
Training <strong>and</strong><br />
Development<br />
High<br />
Commitment<br />
Work Systems<br />
High<br />
Performance<br />
Work Systems<br />
Small<br />
effect<br />
(.1
HR practices targeting<br />
competency profile<br />
Recruitment <strong>and</strong> selection<br />
o Individuals as ‘bundles of future decisions’<br />
o Small corridor of possible change<br />
Investment into training <strong>and</strong> development<br />
o Increasing strategic flexibility of the organisation<br />
o Positive signal to employees: ‘valuable assets’<br />
o Potentially increases individual career capitals –<br />
growing importance in times of transactional<br />
psychological contracts<br />
24 W. MAYRHOFER<br />
ivm@Vilnius 2009
Investment into training <strong>and</strong><br />
development<br />
70 7,0<br />
6,0<br />
% of annual payroll costs spent on training <strong>and</strong><br />
development<br />
Cranet Executive Report 2005<br />
6,3<br />
5,0<br />
4,0<br />
3,0<br />
2,0<br />
1,5<br />
2,2 2,3 2,4 2,6 2,6 2,8 2,8 3,0 3,0 3,1 3,1 3,3 3,5 3,5 3,5 3,6 4,0 4,0<br />
2,1<br />
4,7<br />
3,3 3,4 3,7 3,9 3,6<br />
3,9<br />
43 4,3<br />
1,0<br />
0,0<br />
25 W. MAYRHOFER<br />
ivm@Vilnius 2009
HR practices targeting<br />
performance related activities<br />
E.g. performance appraisal, performance<br />
related pay, stock options<br />
Try to link individual <strong>and</strong> group performance to<br />
incentive structure<br />
Can be a two-edged sword<br />
o Crowding out effects – substituting intrinsic through<br />
extrinsic motivation<br />
o Costs often higher than before<br />
26 W. MAYRHOFER<br />
ivm@Vilnius 2009
Percentage of employees<br />
affected by… (EU-27)<br />
Welz/Fernández-Macías 2008: 486<br />
27 W. MAYRHOFER<br />
ivm@Vilnius 2009
Development of performance<br />
related compensation 1992-2004<br />
1992 2002 1992 2002 1992 2002<br />
SwitzGreeceSwedenSpain Italy UK<br />
6<br />
5<br />
4<br />
3<br />
2<br />
Degree of regulation<br />
Low<br />
Medium<br />
High<br />
Em mpRew<br />
6<br />
Fin FranceGerm Neth<br />
1<br />
Nor Austria Den<br />
5<br />
4<br />
3<br />
2<br />
1<br />
Mayrhofer et al 2008<br />
1992 2002 1992 2002 1992 2002 1992 2002<br />
28 W. MAYRHOFER<br />
ivm@Vilnius 2009<br />
Years
The importance of bundles<br />
Single practices are of little use<br />
Different practices can be bundled<br />
Not only additive effect<br />
o Compatible with each other<br />
o Linked to <strong>organisational</strong> strategies <strong>and</strong> goals<br />
Effects on different outcome variables<br />
29 W. MAYRHOFER<br />
ivm@Vilnius 2009
Example: Bundle approach<br />
Structural model<br />
HR practices<br />
Firm performance<br />
Employee development<br />
Internal career strategy<br />
Staff reduction<br />
Strategic HR development<br />
Individualised virtual work <strong>and</strong><br />
communication<br />
Team work management<br />
Employee compensation<br />
Financial performance<br />
participation<br />
Share schemes offer<br />
Stock options offer<br />
Performance based pay<br />
Group-performance based pay<br />
Profit sharing/stock options<br />
management<br />
HRM bundles<br />
HR configuration<br />
Institutionalisation of HR<br />
Shared responsibility for<br />
industrial relations<br />
Employee communication<br />
Team briefing<br />
<strong>Management</strong> operational<br />
briefing<br />
<strong>Management</strong> strategic<br />
briefing<br />
Non-managerial strategic<br />
briefing<br />
Non-managerial operational<br />
briefing<br />
Workforce meetings<br />
Formalised communication<br />
Performance measures<br />
Subjective<br />
Efficiency<br />
Financial success<br />
Objective<br />
Efficiency<br />
Financial success<br />
Service quality<br />
Productivity<br />
Rate of innovation<br />
Revenue minus costs<br />
Profitability<br />
Productivity<br />
Return on investment<br />
(mean 2000-2002)<br />
Cash flow<br />
(mean 2000-2002) 2002)<br />
Measurement model<br />
30 W. MAYRHOFER<br />
ivm@Vilnius 2009<br />
Reichel/Mayrhofer 2007
Effects of HR bundles on<br />
<strong>organisational</strong> outcome<br />
Dependent Variables<br />
Financial success Efficiency<br />
subjective objective Subjective objective<br />
Independent Var: HR Bundles beta beta beta beta<br />
Financial Performance Participation .347** .256** .127 .212*<br />
Performance-based Pay -.056 -.209* -.071 -.083<br />
Staff reduction -.461** -.246** -.149 .264**<br />
Strategic HR Development -.150 -.108 -.227** -.148<br />
Formalised Idea Communication .018 .088 .042 -.284**<br />
Team-Work <strong>Management</strong> -.142 -.061 .379** -.118<br />
Workforce Meetings -.021 -.085 .194* .165<br />
Institutionalisation of HR .176* .274** .057 .212**<br />
N=270 Austrian companies<br />
(Cranet 2004) Reichel/Mayrhofer 2007<br />
31 W. MAYRHOFER<br />
ivm@Vilnius 2009
Beyond additive effects: 1+1=3<br />
0.06<br />
Individual Performance <strong>and</strong> Development Measures<br />
0.04<br />
nce effect (B<br />
eta)<br />
Performa<br />
0.02<br />
0.00<br />
0.02<br />
0.04<br />
0.06<br />
0.08<br />
0.10<br />
IC_0p * IC_1p * IC_2p * IC_3p IC_4p IC_5p IC_6p IC_7p IC_8p * IC_9p * IC_10p<br />
Number of Practices adopted Poutsma/Ligthart 2008<br />
32 W. MAYRHOFER<br />
ivm@Vilnius 2009
Cultural <strong>and</strong> institutional<br />
Cultural <strong>and</strong> institutional<br />
variations
Major clusters of HRM in Europe<br />
Ignjatovic/Svetlik 2002<br />
34 W. MAYRHOFER<br />
ivm@Vilnius 2009
HRM in different European clusters<br />
Central Southern cluster<br />
o Austria, Czech Republic, Germany, Italy, Portugal, Slovenia,<br />
Spain<br />
o <strong>Management</strong> supportive model<br />
• Internal orientation<br />
• Limited use of sophisticated HR systems <strong>and</strong> methods<br />
Eastern cluster<br />
o Bulgaria, Cyprus, Estonia, Greece, Irel<strong>and</strong>, Northern Irel<strong>and</strong>,<br />
Turkey<br />
o <strong>Management</strong> focused model<br />
• Strong influence of line <strong>and</strong> general managers on HR<br />
• HR specialists with limited influence<br />
35 W. MAYRHOFER<br />
ivm@Vilnius 2009
HRM in different European clusters<br />
Nordic cluster<br />
o Denmark, Finl<strong>and</strong>, Norway, Sweden<br />
o Employee focused HR model<br />
• Involvement of employees<br />
• Focus on training <strong>and</strong> development<br />
Western cluster<br />
o Belgium, France, Netherl<strong>and</strong>s Switzerl<strong>and</strong>, UK<br />
o Professional HR model<br />
• High professionalisation of HRM<br />
• Market orientation<br />
• High degree of outsourcing<br />
36 W. MAYRHOFER<br />
ivm@Vilnius 2009
Concluding remark
Basic messages<br />
Research clearly identifies major contributions<br />
of HRM to organizational performance<br />
o Aligning HR with <strong>organisational</strong> mission <strong>and</strong> goals<br />
o Bridging between various stakeholders<br />
o HR practices<br />
• Competency profile of human resources<br />
• Performance related activities<br />
Caveat: no one-size fits all, but cultural <strong>and</strong><br />
institutional variation<br />
These contributions ti also have <strong>sustainable</strong><br />
character as they target the ‘deep structure’ of<br />
the organisation<br />
38<br />
W. MAYRHOFER<br />
ivm@Vilnius 2009
<strong>Human</strong> <strong>Resource</strong> <strong>Management</strong><br />
<strong>and</strong> <strong>sustainable</strong> <strong>organisational</strong><br />
<strong>growth</strong><br />
Wolfgang Mayrhofer, o. Univ.-Prof. Dr.<br />
WU (Vienna University of Economics <strong>and</strong> Business)
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