Hpws And Hrd Paper-scott Thor

HPWS & HRD 1 Scott Thor – BUSG 708 – HR in High Performance Organizations

High Performance Work System and Human Resource Development Scott Thor George Fox University Doctor of Management BUSG 708 Human Resources in High Performance Organizations November 1, 2009

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High Performance Works System and Human Resource Development The modern organization is being challenged like never before to constantly improve as global competitive pressures continue to rise. The challenge facing organizational leaders has led to a number of theories and techniques for improving performance. A summation of the characteristics leading to improved performance is offered by deWaal (2007) in his literature review of high performance organizations (HPOs). A HPO is defined by deWaal as: An organization that achieves financial results that are better than those of its peer group over a longer period of time, by being able to adapt well to changes and react to these quickly, by managing for the long term, by setting up an integrated and aligned management structure, by continuously improving its core capabilities, and by truly treating the employees as its main asset. (p. 3) Many of the characteristics identified by deWaal (2007) used to describe a HPO can be attributed to what is known as a high performance work system (HPWS). This paper seeks to provide an understanding of a HPWS, its link to the elements of human resource development (HRD), and how they contribute to creating a HPO. The paper begins with a brief overview of scientific management and bureaucracy, two management theories, that despite being developed nearly a century ago, still have a significant influence on modern organizations. With these theories as the foundation most modern businesses are built upon, the paper transitions into defining and describing a HPWS that addresses some of the key weaknesses of scientific management and bureaucracy. Also discussed are a set of principles for

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designing a HPWS and critical success factors for implementing a HPWS. Next, the paper describes the link between a HPWS and HRD in addition to how HRD plays a critical role in the implementation and success of a HPWS. The paper concludes with a discussion of the positive and negative aspect to a HPWS. The Foundation of Modern Organizations An argument can be made that the modern organization is based on principles developed nearly a century ago. In the first part of the twentieth century Fredrick Winslow Taylor developed what he called “scientific management”. During this time period Taylor began an effort to divide labor, leading to the creation of scientific management. Taylor is best known for his research on studying workers and doing time and motion studies, which were used to increase efficiency in the workplace. Taylor’s (1916) scientific management consisted of four key elements: 1. Gathering of knowledge about the work (time and motion studies) 2. Selection of the workman 3. Bringing of the workman and the science together 4. Division of work The knowledge Taylor spoke of gathering began by studying workers and breaking down the work they were doing into its simplest form. Time and motion studies were also conducted to understand how long it took for a particular task to be completed. The first element gave Taylor the basis for improvement by providing a baseline of performance. With an understanding of the work, Taylor believed the selection of the workman was of great importance to achieving maximum efficiency. He believed it was

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management’s job to select the workers best suited for the work. If workers were not matched with the jobs they were doing he believed productivity would suffer. The third element of scientific management consisted of bringing the worker and science together. Without bringing the two together companies using the scientific management principles could not realize the benefits they offered. In order to bring the two together Taylor suggested management should offer the workman something he felt was worthwhile for working under the conditions, essentially an incentive to make the workman want to work under the scientific management principles. The final aspect of scientific management is the division of work. As Taylor (1916) described, under the old system of management the workman did most of the work, but with the new system work was divided into two parts. One component of the work was now given to management, leaving the other for the workman. Taylor argued by dividing the work it created an atmosphere of teamwork between management and the workman because each group was dependant on the other. Taylor’s work benefited the workman greatly, increasing his earnings and also lowering the cost of goods produced. During the same time period Winslow developed scientific management Max Weber, a German sociologist, established a management model called bureaucracy. Weber believed that rules were the basis for decision-making and could replace the need for individual judgment, ultimately leading to increased organizational efficiency. Weber’s (1946) model was based on seven key characteristics: 1. Division of labor 2. Hierarchy

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3. Rationality of rules 4. General rules 5. Written documentation 6. Technical expertise 7. Full and continuous employment Weber, like Taylor, believed that labor needed to be divided and specializations created so that specific training could be given for each task. This would then lead to greater organizational efficiency. Weber also believed that, like division of labor, hierarchy needed to be created and divided amongst the organization to establish the specific authority for each functional group within the organization. To create consistency Weber believed that rational rules should be established to minimize variation in performance and special treatment of individuals. He also believed that having rational rules would displace the tendency of emotions playing into making decisions. General rules were also a belief of Weber in which he believed that published guidelines would replace the need for administrative systems and unpredictable subjective decisions. Documentation was also a key element to Weber’s model of bureaucracy, aiding in the ability to trace actions taken by others that could be reviewed for compliance and investigation when problems arose. Weber’s model also addressed the issue of recruitment. The technical expertise of the individual, according to Weber, should be the basis for selection and promotion as opposed to personal relationships. With the right fit between the individual and the job, Weber believed that full and continuous employment could be realized, leading to

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assurance that customer’s expectations would be achieved and the success of the organization. One could easily argue that much of the foundation in the modern organization is based on the principles defined by Winslow and Weber nearly a century ago. Their work created a model of efficiency, and is the basis of how many organizations still believe is the most logical way to create a productive environment. Despite the success of the model based on the work done by Winslow and Weber, it left little room for capturing the motivation and creativity of workers. Jobs were based on narrow objectives and repetitive tasks, leaving minimal opportunities for workers to contribute with their ideas for improvement. Although the model led to a significant improvement in organizations it also had three key weaknesses (Nadler & Gerstein, 1992): 1. The model was based on managing stable and predictable situations, and as businesses developed and needed to change rapidly, the model became less effective. 2. The model was based on the assumption that workers were uneducated, had little mobility in changing jobs, and were driven entirely by economic needs. As the workforce began a transformation to one of educated individuals seeking more than just a paycheck the model began to break down. 3. Organizations using the model began to develop greater complexity, focus more inwardly, and become less manageable. Beginning in the 1940’s management theorist and practitioners began to uncover several weaknesses in the style of management grounded in scientific management

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and bureaucracy (Roethlisberger, 1941; Maslow, 1943; McGregor, 1957). Based on the belief that people wanted to contribute their ideas to help achieve the objectives of the organization and find meaning in their work, several new concepts such as participative management, team building, and job enrichment and enlargement began to take shape in organizations, creating the foundation for the HPWS. Defining a High Performance Work System The HPWS has been described and defined by several researchers, scholars, and authors. There is no generally accepted definition of the HPWS, but many similarities exist between the experts. Nadler, Gerstein, and Shaw (1992) define a HPWS as: An organizational architecture that brings together work, people, technology and information in a manner that optimizes the congruence of fit among them in order to produce high performance in terms of the effective response to customer requirements and other environmental demands and opportunities. (p. 118) Bohlander and Snell (2004) define a HPWS as “a specific combination of HR practices, work structures, and processes that maximize employee knowledge, skill, commitment and flexibility” (p. 690). They add to the definition by suggesting that a HPWS is a system of several interrelated components that contribute to the goals of an organization. The central idea of a HPWS is to create an organizational environment that is not based on employee control, but that of one based on employee participation, dedication, and empowerment (Tomer, 2001). The primary difference between the

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models previously defined grounded in the work of Winslow and Weber, commonly referred to as the control-oriented approach, and a HPWS, is based on how the control of work is organized and managed at the lowest level in the organization. Companies that utilize the control-oriented approach assume that work must be standardized, simplified, and specialized, and that management should use incentives to motivate individuals (Lawler, 1992). As Lawler describes, “the thinking and controlling part of work is separated from the doing of the work” (p. 28). Employees, especially those in high volume mass production environments, are considered as simply unthinking agents of the owners (Tomer, 2001). To the opposite, Lawler argues that in organizations utilizing a HPWS, employees should be responsible for improving processes and procedures, solving problems that lead to improvements, and coordinating their work with others in the organization. Lawler also describes the environment of one in which employees should be expected to work without the need of a supervisor directing their daily activities. By defining a clear vision, mission, and objective, management sets the direction for employees operating in a HPWS environment without the need to define step-bystep instructions for achieving the goals of the organization. By doing so management allows for the full utilization of each employee’s unique talents, which not only helps the organization achieve its objectives, but also creates a system in which everyone can self-actualize, bringing a greater sense of meaning to ones work. In an influential study conducted by Appelbaum et al. (2000) thirteen practices were compiled to define a HPWS. From the thirteen practices Appelbaum et al. have

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established what they describe as four unique “bundles”. Table 1 illustrates the practices and bundles. Practices

Bundles

Group Problem Solving Group Working Group Control Group Incentives Merit Pay Profit Sharing Individual Incentives Workplace Incentives Appraisal for Pay Appraisal for Promotion Appraisal for Training Briefing Groups Two-way Meeting

Teamwork

Incentives

Development Communications

Table 1

At the heart of a HPWS is teamwork. As Appelbaum et al (2000) describe, teamwork involves individuals from all levels and creates an environment of empowerment where employees have the ability to make decisions and contribute to problem solving activities that have an impact on their work. This ultimately leads to creating greater commitment from all those involved in the decision making process, and should lead to improved performance. Incentives also play a key part in creating and sustaining a successful HPWS. Organizations need to provide incentives to employees to stimulate an environment where everyone is willing to provide ideas for improving the performance of the system they work in, which results in overall improvement of the organization’s performance. Incentives can take on a number of different forms, but in most cases are linked to group performance. To improve performance individuals need to increase their abilities through developmental activities. These activities are generally linked to training and

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educational initiatives that lead to improving the potential of employees, resulting in increased responsibilities and taking on more challenging and rewarding work. A final bundle described by Appelbaum et al. (2001) is communication. This bundle can also be viewed as the data that drives a HPWS. With increased communication making better decisions becomes easier, and when the information driving those decisions is readily available it increases the velocity at which they can be made and the impact of their results realized. In theory, no two HPWS are identical. The needs of an organization should determine the practices utilized in the creation of a HPWS. Gephart and Van Buren (1996) argue that not all practices need to be implemented to achieve high performance. What Gephart and Van Buren believe is required to achieve high performance is synergy. Synergy is the result of alignment and fit of the practices along with people who are committed and passionate about their work. Critical to creating synergy is the design of a HPWS. Designing a HPWS HPWS design must be based on the organization’s needs. Despite this, HPWS design is guided by specific principles that focus on employee involvement and empowerment (Farias & Varma, 1998). Implementing a HPWS typically signifies a shift from employee control to employee involvement. Gephart (1995) suggests that to be successful, a HPWS should focus on self-directed teams, quality circles, flatter organizational structures, unique incentive systems, increased training, and continual improvement.

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Perhaps most critical to the design of a HPWS is alignment. Gephart and Van Buren (1996) suggest that a HPWS is more than high performance work, and an organization will not achieve high performance unless their efforts are in alignment with the organization’s mission. Alignment comes from ensuring several organizational elements are in position with one another, thereby creating the potential for high performance. Gephart and Van Buren suggest the following as a list of key elements that should be in alignment with the design of the HPWS: •

Strategy, vision, mission, and goals

•

Beliefs and values

•

Management practices

•

Organizational structure

•

Work practices and processes

•

Human resource systems

•

Other systems such as technology (p. 24)

The alignment starts at the design stage and continues on through implementation, but is never fully complete. Gephart and Van Buren (1996) suggest that full alignment is never achieved and the organization should always be “fine tuning” the system to improve alignment. The design of the HPWS should allow for a continual feedback mechanism to help improve alignment based on lessons learned. Nadler, Nadler, and Tushman (1997) have similar design principles to the concept of alignment suggested by Gephart and Van Buren (1996), although they place additional emphasis on the sharing of information and flexible work systems. Nadler et al. identify the following ten principles for the design of a HPWS:

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1. Clear link to organizational strategy 2. Empowered and autonomous units at different levels of analysis 3. Clear vision, mission, and goals that help create a boundary within which the autonomous units work 4. Control variance at the source 5. Integration of social and technical systems 6. Information sharing and access 7. Multi-skilling that enables team members to rotate jobs 8. Human resource practices that support empowerment 9. An empowering management structure 10. Capacity to reconfigure and renew Nadler et al. (1997) suggest the design of a HPWS starts with establishing a clear link to the organization’s strategy. This begins by focusing outward on the requirements of customers and then starting the process of developing the appropriate organizational work processes. Teams are the second element of design and the core of a HPWS. Nadler et al. argue that they should be designed around whole pieces of the work. Without clear boundaries problems are likely to arise. Establishing the boundaries ensures work teams understand where their decision-making ability starts and ends. Controlling variance at the source allows teams to catch quality problems early and implement solutions to prevent them from recurring. This design element also creates ownership of the problems by the teams in which they originate.

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Integration of both social and technical systems is a consideration Nadler et al. (1997) believe is a critical component in designing a HPWS. A HPWS should optimize the needs of the employees in the organization with the demands of the technical system. Better decisions come from having the right data at the right time. Sharing of information within a HPWS not only creates better results it gives ownership of decisions to those with the data. Multi-skilling creates flexibility in the system by allowing all team members to rotate through multiple assignments. It not only benefits the organization in the ability to make rapid changes, but also in creating greater challenge and variety in the work of employees. Human resource (HR) practices also need to be considered when designing a HPWS to ensure the selection, incentive, and reward systems are congruent to the HPWS. The management structure, culture, and processes all need to support and embrace the HPWS for it to be successful. A HPWS is typically a drastic departure from most organizational management structures where employees are directed instead of doing the directing, and without the support of management a HPWS will likely fail. A final aspect to the design of a HPWS is the ability to change. No HPWS is perfect and changes are simply part of the process. Like any system, the HPWS must have a mechanism in place to allow for flexibility based on changes in the environment the HPWS exists within. An argument could be made that even more difficult than designing a HPWS is the task of implementation. The concept of HRD and HPWS have many similarities. HR

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professionals play a critical role in merging the two concepts that can ultimately lead to high performance if implemented effectively. HRD and HPWS Before establishing the link between HRD and a HPWS it is important to understand the basic elements defining HRD. HRD combines the primary component of HR, people, with the development of both people and the organization. Gilley, Eggland, and Gilley (2002) refer to development of people as the increase in knowledge, abilities, and competencies with the purpose of improving the overall effectiveness of an organization. This development encompasses the first two areas defining HRD, individual development (ID) and career development. By developing people within an organization, performance improvement, the third element of HRD, helps improve productivity and quality, which create a higher probability of increased financial performance. The final element of HRD is organizational development (OD). Gilley et al. describe OD as continuous improvement of an organization’s culture through intervention activities related to the vision, mission, values, policies, procedures, and overall working environment. For an organization to be competitive and productive a continuous cycle of improvement and change needs to exist. With this, the primary goal of HRD is performance improvement and organizational change (Gilley et al., 2002). Bringing ID, career development, performance management, and OD together as the foundation of HRD, Gilley and Maycunich (2000) define HRD as, “the process of facilitating organizational learning, performance, and change through organized (formal and informal) interventions, initiatives, and management actions for the purpose of

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enhancing an organization’s performance capacity, capability, competitive readiness, and renewal” (p. 6). Figure 1 illustrates the four key elements of HRD. •  Training
 •  Educa6on
 •  Crea6ng
a
learning
 environment
 •  Micro
perspec6ve


•  Con6nual
improvement
 •  Incen6ves
 •  Rewards
 •  Recogni6on


Individual
 Development


Performance
 Management


Career
 Development


Organiza6onal
 Development
 •  Improving
perfomance
 capacity,
growth,
and
 compe66veness
 •  Strategy
development
 •  Macro
perspec6ve


•  Appraisal
process
 •  Alignment
of
organiza6on
 and
individual
goals
 •  Crea6ng
challenging
and
 rewarding
work


Figure 1 Elements of HRD

Reviewing the previously described four key bundles related to a HPWS (Appelbaum et al., 2000), teamwork, development, incentives, and communications, one can begin to visualize the connection between HRD and a HPWS. The most evident commonality between the two is a central focus on performance improvement and organizational results, but also common to both systems is increasing the capacity of individuals, ensuring alignment between individuals and the organization, creating reward, recognition, and incentive systems based on performance results, empowering teams to solve problems that increase performance, and a strategic focus based on external demands and opportunities. ID and HPWS The primary focus of ID is placed on individual growth and development through both formal and informal activities (Gilley et al., 2002). Gilley et al. state that the purpose of ID is, “to increase employee knowledge, skills, and competencies and/or to

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improve behaviors in current jobs, at the same time addressing the immediate needs of the organization as well as that of the employee” (p. 30). Appelbaum et al. (2000) state that employees in a HPWS can only tap into their initiative, creativity, and knowledge if they have the appropriate skills and knowledge, much of which comes through training and educational initiatives. Both ID and a HPWS thrive on creating a learning environment where individuals are challenged each day to increase their ability and value to an organization. Increasing individual capacity also leads to a stronger team on which the individual participates, playing a key role in developing a robust HPWS. Career Development and HPWS Gilley et al. (2002) define career development as, “an organized, planned effort comprised of structured activities or processes that result in a mutual career plotting effort between employees and the organization” (p. 59). A similar alignment needs to be in place for an effective HPWS to deliver results (Gephart & Van Buren, 1996). Without alignment between the individuals utilizing the HPWS the expected results are less likely to materialize. Also common between HRD and a HPWS is the use of an appraisal process. One could argue that this process is the most important aspect of each system, providing the feedback mechanism that translates into continual improvement of not only the individual, but the entire system as well. Performance Management and HPWS The importance of performance management is a relatively new development in HRD (Gilley et al., 2002). Gilley et al. contend that performance management is strongly connected to human performance technology (HPT). Fuller and Farrington (1999) describe HPT as a way of identifying barriers to success faced by employees, and the

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process of removing them to allow improvement, and the full realization of employee potential. In a HPWS employees are constantly faced with the barriers Fuller and Farrington describe. Gilley et al. also prescribe the strategy of developing self-directed employees, which is at the heart of a HPWS. A final similarity lies in the use of incentive systems for recognizing and rewarding performance. Gilley et al. suggest a strategy of rewarding team performance rather than individual performance that will lead to improved teamwork and cooperation amongst individuals, which is also a key component in a HPWS incentive system. OD and HPWS The final component in HRD is OD. There are several definitions of OD, but most share common characteristics and only differ in scope and the intention of change (Dunn, 2006). OD requires involvement from all employees to be effective and the support of top management (Conner, 1992; Kotter, 1996), views organizations from a system-wide perspective and includes planned initiatives directed by third party change agents that are ongoing (Burke, 1992; French & Bell, 1995), and focuses on measurable results that are strategically based (French & Bell, 1995; Kotter, 1996; Nadler, 1998). The primary goal of OD is to improve the performance of organizations (Burke, 1992; Nadler, 1998). Similar to OD, a HPWS is focused on organizational improvement (Gephart & Van Buren, 1996; Nadler et al., 1997; Hanna, 1988), requires commitment from all levels of the organization (Nadler et al., 1997), and supports the effective implementation of strategy, leading to the realization of organizational objectives (Dyer, 1993; Pfeffer, 1994; Becker & Huselid, 1998).

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Communication, a fourth bundle of a HPWS, not only encompasses verbal and written communication, but also the data used in decision-making. There is no doubt that communication and quality data are critical to all elements of HRD. Table 2 summarizes the commonalities between the elements of HRD and the HPWS bundles. HRD Elements

HPWS Bundles

Individual Development Career Development Performance Management

Organizational Development

Teamwork Development Communications Development Communications Teamwork Incentives Communications Teamwork Development Incentives Communications

Table 2

Positive and Negative Aspects of a HPWS A HPWS has the potential to create significant positive results such as improved productivity and increased quality levels. They can also lead to increased stress levels and a more intense work environment. Implementation can also prove to be a challenging task with several potential problems. King (1995) summarizes the results of several studies related to HPWS. The studies he discusses demonstrate correlation between firm performance and specific work practices. The work practices examined include skill training, compensation policies, and workplace participation. Skill training focuses on quality and the prevention of errors, which requires employees to have a broader understanding of the processes they use and the technology used to measure them. Researchers found that training helped reduce scrap rates, and by doubling the initial training time of workers from 15 to 30 hours resulted in a seven percent decrease in scrap. Eight of the studies also showed an increase in

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wages by up to 12 percent for those employees who participated in a training program sponsored by their employer (King, 1995). Incentive programs are a key component to a HPWS. A majority of the studies showed a significant positive correlation between productivity and profit sharing. In organizations that offered profit sharing productivity was three to five percent higher than in those without a program. The use of profit sharing was also linked to increased productivity in 841 manufacturing organizations in Michigan (King, 1995). Workplace participation was reviewed in 29 studies, of which 14 indicated participation resulted in increased productivity. Participation was measured based on the existence of quality teams, work teams, and work councils and the number of employees participating in them. King (1995) concludes that work teams were more likely to be successful when they have decisions making power, such as in work teams and councils, rather than consultative power more common to quality teams. The overwhelming majority of the literature on HPWS praise the positive aspects of implementing such a system, and most research points to very few negative attributes of creating a high performance work environment, but an argument can be made that by increasing the responsibilities of workers and putting less burden on management could lead to a more stressful and intense environment. Workers need to be ready to deal with this added stress as they transition from executing decisions made by management to making the decisions themselves. Despite all the positive related to a HPWS most organizations have been slow to implement (Tomer, 2001). Several potential reasons for the slow adaption include high initial costs for training, difficulty in satisfying investor’s short-term expectations,

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management resistance, relationships with labor unions, and institutional barriers such as U.S. labor laws (Appelbaum & Batt, 1993). Conclusion Why should organizations implement a HPWS? Perhaps the most compelling argument for a HPWS is to create a strategic competitive advantage that results in a HPO. One of the keys to creating strategic advantage is developing what cannot be easily replicated. Many components of an organization are easy to duplicate by competitors when they are viewed individually, but the advantage and the power in a HPWS lies in the fact that not one individual HPWS practice can return the results combining several of them can. Combining the right compilation of HPWS practices not only has the potential to generate substantial results, it also has the potential to create what is difficult to replicate by competitors. A HPWS also present a great opportunity for HR professionals to position themselves in a strategic role within an organization by combining the power in the elements making up HRD and the practices of a HPWS. By taking on this role the traditional view of HR will continue to navigate away from the cost-driven transactional activities commonly associated with HR, and provide an opportunity to build value in the organization and the role of the HR professional.

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French, W. L. & Bell, C. H. Jr. (1995). Organizational development: Behavioral science interventions for organizational improvement. Englewood Cliffs, NJ: PrenticeHall. Fuller, J. & Farrington, J. (1999). From training to performance improvement: Navigating the transition. San Francisco: Jossey-Bass. Gephart, M. A. (1995). The road to high performance: Steps to create a highperformance workplace. Training & Development, 49(6), 29-38. Gephart, M. A. & Van Buren, M. E. (1996). Building synergy: The power of high performance work systems. Training and Development, 50(10), 21-36. Gilley, J. W. & Maycunich, A. (2000). Organizational learning performance, and change. An introduction to strategic HRD. Cambridge, MA: Perseus Publishing. Gilley, J. W., Eggland, S. A., & Gilley, A. M. (2002). Principles of human resource development (2nd ed.). Cambridge, MA: Basic Books. Hanna, D. P. Designing organizations for high performance. Reading, MA: AddisonWesley. King, J. (1995). High performance work systems and firm performance. Monthly Labor Review, 118(5) , 29-36. Kotter, J. P. (1996). Leading change. Boston: Harvard Business School Press. Lawler, E. E. (1992). The ultimate advantage: Creating the high involvement organization. San Francisco: Jossey-Bass. Maslow, A. H. (1943). A Theory of Human Motivation. Psychological Review, 50, 370396.

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