Human Resource Policies: The Road to Superior Micro and Macro Economy?
By Dr. Hussein Ismail - April 15, 2011
There are many organizational factors that can impact business performance, and those elements may be related to advanced manufacturing technologies, total quality management procedures, smart strategies and financial capital. However, recent studies indicate that modern human resource management policies seem to be the most important.
Most people know about human resource management policies. It involves the successful management of firm employees achieved through common official policies such as performance appraisals, pay policy, and training and development policies. However, what is not so clear is that there is a difference between the common, traditional human resource policies that emphasize control and modern human resource policies, which are the focus of this article. Modern or innovative HRM policies focus primarily on harnessing the potential of employees in the firm. Here, traditional hard policies that managers use mainly for control and monitoring of employee performance are somehow replaced or combined with softer policies. These policies, in turn, fully recognize employees’ value in the firm, which portrays to employees that they are highly valued and appreciated.
The logic here is that by showing employees that they are highly recognized and trusted, they will become more loyal to the organization and will therefore increase their motivation, performance and commitment to organizational goals. These practices involve sharing information with employees, involving them with job decisions, providing them with interesting jobs and rewarding them, which impacts their psychological satisfaction.
This, however, is only half of the story for organizations that aspire to become leaders in their industry. Firms should also be focusing on advanced policies that can ensure that employees have the needed skills. There is no benefit if employees are highly motivated and committed, but lack the necessary skills and direction to do the job well.
The ultimate goal, then, is that firms should invest in policies that advance employees’ skills & abilities, provide direction, and increase their motivation and satisfaction, as noted above. Accomplishing this task will eventually deliver the goods. Fortune 100 firms’ success has been related to their investment in people. Technically speaking, successful HR policies include the following, familiar-seeming practices. When skillfully applied, in combination, the gains and benefit to the organizations are very high, as personal research, work and experience has continually shown. They are:
1) Sophistication in employee selection and recruitment (e.g. psychometric tests)
2) Induction
3) Extensive training and development
4) Formal performance appraisals
5) Adopting flexible skill programs
6) Job variety
7) Job responsibility
8) Teamwork
9) Employee communication
10) Quality improvement teams
11) Harmonization
12) Comparative pay
13) Incentive compensation systems
In regards to the benefits that these practices have on corporate performance, note the following ten-year longitudinal study in the United Kingdom: Patterson and his colleagues at the University of Sheffield and London School of Economics studied some 80 UK manufacturing companies and found that modern HR policies alone contribute as much as 19% change in profits and 18% in change in productivity (in the companies studied).
There have also been many studies in this respect which have reached the same conclusion: HRM is related to better organizational performance; better product quality, lower human error, and higher sales revenue, all thanks to a more capable and better workforce.
On the macro level, the fact that HRM seems to have a big influence on companies’ performances, as evident in many studies, has direct implications on the national level of economic performance. Adopting a higher number of modern human resource policies at the company level leads to higher economic growth and performance on the national level. In a study by Paul Boselie and his colleagues in the Netherlands, it was concluded that by adopting many of the modern HR practices at the national level, the Dutch economy outperformed its neighboring European economies on a number of economic indicators (e.g. economic growth and job creation).
On a more ambitious note, HRM practices can be a key to improving the economy. A governmental support program that ensures a standardized high adoption and effective implementation of modern HR policies across organizations can eventually help in enhancing the abilities (and motivation) of the workforce. This, then, can result in superior goods (and services), which leads to higher country exports and an improved economy, eventually.
The message is clear: Investing in modern human resource policies seem to pay off greatly with higher organizational performance and a better economy.
By Dr. Hussein Ismail - April 15, 2011
There are many organizational factors that can impact business performance, and those elements may be related to advanced manufacturing technologies, total quality management procedures, smart strategies and financial capital. However, recent studies indicate that modern human resource management policies seem to be the most important.
Most people know about human resource management policies. It involves the successful management of firm employees achieved through common official policies such as performance appraisals, pay policy, and training and development policies. However, what is not so clear is that there is a difference between the common, traditional human resource policies that emphasize control and modern human resource policies, which are the focus of this article. Modern or innovative HRM policies focus primarily on harnessing the potential of employees in the firm. Here, traditional hard policies that managers use mainly for control and monitoring of employee performance are somehow replaced or combined with softer policies. These policies, in turn, fully recognize employees’ value in the firm, which portrays to employees that they are highly valued and appreciated.
The logic here is that by showing employees that they are highly recognized and trusted, they will become more loyal to the organization and will therefore increase their motivation, performance and commitment to organizational goals. These practices involve sharing information with employees, involving them with job decisions, providing them with interesting jobs and rewarding them, which impacts their psychological satisfaction.
This, however, is only half of the story for organizations that aspire to become leaders in their industry. Firms should also be focusing on advanced policies that can ensure that employees have the needed skills. There is no benefit if employees are highly motivated and committed, but lack the necessary skills and direction to do the job well.
The ultimate goal, then, is that firms should invest in policies that advance employees’ skills & abilities, provide direction, and increase their motivation and satisfaction, as noted above. Accomplishing this task will eventually deliver the goods. Fortune 100 firms’ success has been related to their investment in people. Technically speaking, successful HR policies include the following, familiar-seeming practices. When skillfully applied, in combination, the gains and benefit to the organizations are very high, as personal research, work and experience has continually shown. They are:
1) Sophistication in employee selection and recruitment (e.g. psychometric tests)
2) Induction
3) Extensive training and development
4) Formal performance appraisals
5) Adopting flexible skill programs
6) Job variety
7) Job responsibility
8) Teamwork
9) Employee communication
10) Quality improvement teams
11) Harmonization
12) Comparative pay
13) Incentive compensation systems
In regards to the benefits that these practices have on corporate performance, note the following ten-year longitudinal study in the United Kingdom: Patterson and his colleagues at the University of Sheffield and London School of Economics studied some 80 UK manufacturing companies and found that modern HR policies alone contribute as much as 19% change in profits and 18% in change in productivity (in the companies studied).
There have also been many studies in this respect which have reached the same conclusion: HRM is related to better organizational performance; better product quality, lower human error, and higher sales revenue, all thanks to a more capable and better workforce.
On the macro level, the fact that HRM seems to have a big influence on companies’ performances, as evident in many studies, has direct implications on the national level of economic performance. Adopting a higher number of modern human resource policies at the company level leads to higher economic growth and performance on the national level. In a study by Paul Boselie and his colleagues in the Netherlands, it was concluded that by adopting many of the modern HR practices at the national level, the Dutch economy outperformed its neighboring European economies on a number of economic indicators (e.g. economic growth and job creation).
On a more ambitious note, HRM practices can be a key to improving the economy. A governmental support program that ensures a standardized high adoption and effective implementation of modern HR policies across organizations can eventually help in enhancing the abilities (and motivation) of the workforce. This, then, can result in superior goods (and services), which leads to higher country exports and an improved economy, eventually.
The message is clear: Investing in modern human resource policies seem to pay off greatly with higher organizational performance and a better economy.