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I even couldn't open the pdf file attachment as well..
Coming to your query in a refined way is whether investment in HR contribute to bottomline?
Please refer the article for information.
Does investments in HR contribute to bottom-line?
This is a relevant question of todays times facing many organizations who question the importance or rather their impact on the companys bottomline. Some industry commentators call the Human Resources function the last bastion of bureaucracy in the corporate world. Traditionally, the role of the Human Resource professional in many organizations has been to serve as the systematizing, policing arm of executive management.
The three broad perspectives on the ways that HR practice contributes to business performance:
1) "Best Practice" a set of HR practices can be identified, that, when implemented, will improve business performance.
2) "Contingency" business performance will be improved when the best "fit" between business strategy and HR practices is achieved.
3) "Bundles" specific bundles of HR practices can be identified that will generate higher performance in organisations; the most effective composition of these "bundles" will vary in different organisational contexts (see also ).
Pfeffers research has summarised seven characteristics that identifies as the core practices that "characterise most if not all systems producing profits through people". These seven characteristsics are:
an emphasis on providing employment security
the use of self managed teams
decentralisation of decision making; and extensive training
selective hiring of new personnel
reduced status distinctions and barriers
extensive provision of training
compensation linked to performance.
Mark Huselid of Rutgers University, Rhodes Island, undertook the first study to find out whether there are any links between HR practices and organisational performance outcomes. For his study, he selected HR practices like Selection and Recruitment; Training; Job Design: Employee Involvement; Employee Participation; Information Sharing; Compensation; Motivation; and Performance Appraisal System. His findings from the study strongly confirmed the linkages between HR practices and organsiational level outcomes.
Huselid collected data from 968 (sample size: 3209) large and medium-sized organisations representing 35 US industrial sectors. The data from these organisations was collected with respect to HR practices as outlined above, profits, employee productivity (sales per employee), and employee turnover.
On analyzing the data, Huselid found that there was relationship between HR practices, employee turnover, and employee productivity. He found that a 1% increase in the investment and coverage of HR practices results in reducing employee turnover by 7% and increasing sales per employee (i.e., productivity) by $27,000.
Further, he found that 1% increase in the spread of HR practices enhances profitability by more than $4000 per employee per year. This increase in profitability was due to the resultant increase in the productivity and reduced employee turnover, as outlined earlier.
Ichniowski , Shaw and Prennushi ( 1997) American Economic Review examined the use of alternative HR practices in the steel industry with traditional HR practice as the reference point.
High Teamwork : Labor productivity 3.2 % higher
Innovative HR system : Labor productivity 6.7 % higher
Hihg communication : Labor productivity 1.4 % higher
Note that the Individual HR practices had no effect in isolation only in combination.
There is much talk about the role that human resources can play in a company's financial performance, but too few HR departments know how to go about doing it. This is why workforce magazine has embraced the motto of "Real HR. Real Impact."
HR making an impact means HR being strategic: doing work that assures shareholder wealth in the "here and now" while making moves to put the firm in a position of advantage in the "there and then." Being strategic transforms HR into the heart that pumps sustainable competitive advantage throughout the organization. The formula for HR making an impact is HR Impact = Business System X Adaptability. To play this role, HR professionals must not only see the business system from the HR point of view but must also see the HR system from the business point of view.
HR Making a Real Impact
Healthy organizations master the principle of coordination to become aligned, linked, and integrated. They change rapidly, accurately and harmoniously, supplying just the right amount of adaptation to meet the demands of problems at hand. HR contributes to this process by addressing the "significant few" factors that can interfere, hindering growth, development, and shareholder value.
Stephen Covey points up this concept by metaphorically challenging us to differentiate the rocks in our lives from the gravel.
The rocks of HR Impact are:
Financial Management System
General Management System
HR Impact Toolkit
Change Management Technologies
Systems Integration Skills
These five rocks form an integrated business system designed to achieve above-average returns through sustainable means, the definition of Shareholder Value Assurance (SVA). The financial management system creates the SVA context, which serves as the framework for the general management system. Together, these two systems create a value-added framework for the HR Impact Toolkit. Change management technologies and systems integration skills are then applied to these three interdependent systems to deliver SVA. This business system is the anatomy of the healthy organization.
Financial Management System for the HR Impact Professional
To assure shareholder value, management must be able to generate sustainable returns that support their current stock price and achieve their appreciation goals. The key financial drivers of this SVA financial system are the same drivers we focus on when running our personal households: net income, cash flow, and return on investment. When all three of these financial drivers are rising at the same time, the firm is on track to assure shareholder value.
In the SVA financial system, there are no general and administrative expenses, HR's characterization in conventional financial systems. In the SVA system, there is only operational expense: money spent to increase net income, cash flow, and return on investment. By default, this is the role of Real HR: Real Impact!
General Management System
In the context of the SVA financial system, firms must align and link strategy, organization, and operations. Strategy defines what needs to be done; organization is the ability to implement strategy; and operations is getting it done. When creating these alignments and linkages, it is important to distinguish between primary and support functions.
Primary functions are responsible for developing, making, marketing, selling, and delivering products or services, and then collecting the money, all to assure shareholder value. The purpose of support functions is to help the organization perform primary functions better. In this supporting role, one of HR's "significant few" is to help management develop an organization
tailored to its strategy. (In addition), HR's mission is to attract, retain and motivate a highly skilled workforce delivering extra effort, every day, with 0% unwanted turnover. This capability creates above-average returns through sustainable means. The competition sees the effect of HR's impact, but cannot determine the cause, so they are unable to imitate or duplicate it. HR making a real impact is being the catalyst for ordinary people achieving extraordinary results.
The HR Impact Toolkit
There is a causal relationship between properly designed and effectively implemented human resource management systems (HRMS) and substantial increases in sales, profits, and firm market value. Properly designed means tailored to you firm's specific needs and overall environment. Effectively implemented means owned and used by line management as the human resource managers of the firm.
Research by Rutgers' Mark Huselid has associated these systems with increases in sales of $27,000 per employee, increases in profits of $3,800 per employee, and increases in market value of up to $73,000 per employee. These systems provide management with the capability to achieve strategic and operational goals while developing the workforce into a source of sustainable competitive advantage.
To optimize productivity, the HRMS (toolkit) must be internally consistent, mutually reinforcing, and supportive of the firm's overall competitive strategy. For example, if a firm is encouraging employees to work in cross-functional teams, performance management and compensation systems should not focus exclusively on individual performance. Or if the Board of Directors is dissatisfied with management's ability to manage the paradox of short-term and long-term results, they should ensure strategic and paradox management are required competencies for senior executives.
While each part of the HR Impact toolkit influences all elements of the organization, the primary cause-effect relationships are shown below.
Strategy: Human Resource Planning (HRP), Performance Management (PM), Compensation.
Shared Values/Culture: HRP, PM, Selection & Recruitment (S&R), Training & Development (T&D), Compensation.
Structure: HRP, PM.
Systems: HRP, PM, T&D, HRIS.
Skills and Style: HRP, S&R, T&D, PM.
The "punchline" of HR Impact is "to identify, attract, retain, develop, and motivate people with the knowledge, skills, and abilities to manage the systems, within the structure, to achieve the strategy, while living the values."
Of course, effective implementation is as critical as effective design. Here, the key distinction to make is between HR function and HR practice. If the only people fully engaged in HR practice are members of the HR function, the firm is engaged in negative-leveraged activities and bottlenecks. On the other hand, if the HR function designs tools and transfers ownership and effectiveness to line managers fully engaged in HR practice, the firm is a model of real HR making a real impact. Here's a checklist of criteria to help you be effective in managing the implementation of your HR Impact toolkit.
Is the toolkit:
Owned by senior line management?
Embedded in the business system?
Skillfully used by line management?
Reinforced by performance management, compensation, and human resource planning?
Becoming increasingly ingrained in management with each cycle?
Line management pull on HR instead of HR push on line management?
Business Unit HR (BUHR) pull on corporate specialists instead of corporate push on BUHR?
An increasing number of line managers achieving a standard of HRM excellence?
Change Management Technologies
Focus solely on change in organizational structure is invariably disappointing. You also need change in framework and in teamwork, (two additional) dimensions of change that are complementary. Their product is an organization practicing the nature and degree of teamwork that delivers the highest levels of customer value-added and shareholder value assurance.
In addition to organizational change technologies, it is also necessary to master a system of human change techniques. The key elements of these human change techniques are action-based conversations, relationship management, and increasingly participative project management. This powerful combination produces results outside the realm of business as usual - results that would be considered impossible in the "as is" state.
Systems Integration Skills
A business is a set of sub-systems that operate as one larger system to accomplish goals. As a system, the performance of a business depends more on how the parts interact than on how they act independently of each other. The purpose of systems integration skills is to create positive synergy, where the performance of the whole is greater than the sum performance of the parts. The key is to focus on the intersection of these sub-systems and design interfunctional work to optimize the performance of the whole business.
To fully develop systems integration skills, it is important to differentiate between entity and procedural interdependencies. Entity interdependencies are critical linkages between a firm's structural parts, the organizational pieces. For example, entity interdependencies are the relationships between the corporate entity and, if the organization is big enough, group entities, and business unit entities, and then those business unit entities' relationships with line function entities, and then those entities in relationship to staff function entities, like HR.
Procedural interdependencies are critical work linkages between a firm's work flows. For example, one industrial firm refers to its general management system as the battle controls. These controls consist of the vision and values of the organization, which create a context for strategic planning, which in turn integrates with operational planning and human resource planning, which then integrates into budgeting and control, which in turn integrates with performance management, including objective setting and action planning.
It is very important to understand and manage the interrelationship between entity and procedural interdependencies. If not, dysfunction and poor performance result. For example, in one firm, the head of business planning asked the entire organization to submit business plans on the same date. What's wrong with this picture? Well, this is a picture of an organization that does not know what they don't know about entity interdependencies. How can an HR function, whose purpose is to support line functions and the business, develop a business plan at the same time the business and line functions are developing their plans? A real HR plan has to be derived from
the business plans of the business units and line functions it supports. Business planning is a permutation of interdependent procedures that must be sequenced correctly to be effective.
When the entity and procedural interdependencies of "the rocks" are managed effectively, HR is able to deliver the following outcomes to the business:
A strategic HRM system used by line management to achieve strategic and operational goals while developing the workforce into a source of sustainable competitive advantage.
"Best fit" combination of HR processes and methods to most productively integrate shared values, structures, systems, skills, style, and staff with the business strategy.
A healthy organization.
In Shareholder Value Assurance firms, all departments and functions are bonded together in an organized pattern. Each function exists, not as an independent unit, but as part of a coordinated unit, serving definite purposes in the overall structure. Functions are linked to other functions by masterful design. All functions are mutually interdependent, so the various abilities of each contribute to the financial, strategic, and cultural integrity of the whole. These firms are the products of real HR making a real impact.
( There is a direct relationship between investment in HR & profitability of the company-
If the behavior of the employees is well directed & focused by HR
Employee relations initiatives have a direct impact on employee performance
If HR is ever alert to the happenings in the company & acts proactively for instance if the top performer resigns and if HR prevents the same which has a direct impact on the bottomline.
Getting the right people for the right job.
HR takes the holistic view of the job assignments & tasks with the focus on higher productivity and future trends. This can happen if the HR gets the realistic feeling of the job assignments & tasks by working themselves or having the orientation of the key and common tasks.
Employ metrics like attitude or climate survey and initiate the corrective actions.
For above initiatives to succeed HR has to be linked closely with the processes , people and typically stay out of Ivory tower mode which is the common tendency.
Future Role of HR Professional-
Becoming an employee champion catering to the present need of employees and taking care of their problems while advocating their cause
Becoming an HR process expert designing, coordinating and facilitating implementation of various HR processes with changes from time to time
Becoming a strategic partner aligning HR Strategy and processes to the vision and strategy of the organisation and constituent business units
Becoming a change agent preparing people for change to adapt to the future needs as well as dynamic response to changing environment
HR would play a keen role in:
Building customer focus by ensuring that everybody across the organization is aligned towards assuring speed in delivery.
The whole business would be about managing relationships hence relationship management would be very critical.
Ensuring that there's a strong emphasis on result orientation & high level of productivity. So, HR would play a key role in assuring that the essentials of the business are engrained into the various HR processes. The Performance Management System will also be fine tuned to ensure that there is a greater degree of rewards to the employees who perform.
On the one hand, the view of HR as a marginal contributor to organizational success seems to persist. Periodically the HR function is excoriated in the business press for its alleged irrelevancy to customer satisfaction, business profits, and increasing shareholder or stakeholder value. In this view HR is, at best, a collection of well-meaning but out-of-touch corporate bureaucrats who present barriers for employees and managers to hurdle as these real workers strive to deliver quality and value for the customer. Looked at this way, HR will become even more marginal as the strategic decisions and focus of organizational leaders are directed elsewhere.
Here's the contradictory part: Never before has it been so clear that effective human resource management practices lie at the heart of organizational success. Dr. Jeffrey Pfeffer of Stanford University makes a compelling case for high performance people strategies in his 1998 book The Human Equation (Boston: Harvard University Press). Here are four pertinent citations from this book:
A number of studies spanning different organizations operating in various service industries provide evidence for a positive relationship between employee attitudes and customer service and satisfaction and, moreover, a relationship between employee attitudes, customer attitudes, and profits. p. 55
[C]ustomer satisfaction and perceptions of service quality were significantly related to measures of employee attitudes about fairness of pay, whether management was concerned about employee welfare and treated people fairly, and whether supervisors encouraged an open and participative work environment. Ibid
Better service and higher employee satisfaction do, however, frequently produce higher profits. [N]umerous firms, such as Singapore Airlines, have succeeded financially by emphasizing employee well-being and customer service. p. 56
The existing research clearly shows that: "prior empirical work has consistently found that use of effective human resource management practices enhances firm performance." p. 60
My view is that it is HR's job, though not HR's job alone, to champion and shepherd effective human resource management practices at both the strategic and day-to-day levels. That is, to be effective, human resource management practices must be grounded in two ways. First, they must reflect company wide commitments as to how it will manage and relate to its employees. Second, HR must follow-through on such commitments in the moment so that the words of the enterprise and deeds of its agents are congruent.
HR'S PREFERRED FUTURE
Although I see a different emphasis for HR in the future, I see HR's fundamental purpose-to build a positive, productive workplace-remaining unchanged. With this in mind, I see a successful future of HR revolving around three complementary and overlapping roles. I believe in fulfilling these roles HR will prove itself an important and legitimate contributor to organizational achievement. The heart underpinning these roles is "less control, more learning". Here are the roles:
1. FACILITATOR: Facilitating the employee/employer connection, principally through empowering technologies (both digital and procedural) that emphasize employee self-service and managerial independence.
The corollary to this role is consistent striving to minimize dependent relationships between employees/managers and HR through transferring knowledge and expertise from HR to HR's clients. This is accomplished in part by using computer technologies enabling employees and managers to handle transactions online that they formerly needed HR to administer. Through employee and manager self-service features, such technologies also put greater access and control over information in the hands of employees and managers, thus increasing personal mastery and independence.
HR's task here may best be conceived as a "help desk" function: Set-up the systems, teach others to use them, and then get out of the way, answering questions from the field only as these arise.
2. DESIGNER: Designing and helping implement high performance people strategies in partnership with line staff. The scope of such efforts could be quite narrow-at the team level-or system wide. As in #1, the focus is on developing employee and manager self-reliance through the skillful sharing of expertise by HR. The focus, though, is on applying that expertise in ways that are explicitly tied to priorities of line staffs.
What are high performance people strategies? Dr. Pfeffer identifies, "seven dimensions that seem to characterize most if not all of the systems producing profits through people".
1. Employment security.
2. Selective hiring of new personnel.
3. Self-managed teams and decentralization of decision making as the basic principles of organizational design.
4. Comparatively high compensation contingent on organizational performance.
5. Extensive training.
6. Reduced status distinctions and barriers, including dress, language, office arrangements, and wage differences across levels.
7. Extensive sharing of financial and performance information throughout the organization. p. 64-65
3. EDUCATOR: Serving as a catalyst for learning and communication. As educator HR has three jobs: (A) Introduce fresh thinking and new ideas to promote creativity, innovation and successful adaptation within the enterprise; (B) Persist in developing mastery of adopted organizational practices and process improvement methodologies by employees and managers; and, (C) Communicate extensively what's happening within the organization and why, especially as these relate to the seven high performance people strategies identified above.
What will such a function be called? I doubt it will be called human resources. While the new name eludes me, I believe it will be along the lines of "Center for Organizational Effectiveness"; not a department that is separate and apart from other departments, but a Center people are drawn to for nourishment, insight and understanding.
I hope this assessment of the future of HR has some appeal to you. Since I am a strong believer in designing the futures we prefer, the Facilitator/Designer/Educator role may be more reflective of the kind of HR function I want to create, as opposed to where the field is heading generally. Nonetheless, I hope you find the ideas useful as you consider the future human resources function that will best serve your organization.
16th August 2005 From India, Pune
As in a today's competitive world, to retain an employees for a long time with getting quality work is very necessary as because there is so competition among the companies.
To recruit the best talent and retaining it for long time is crucial part. Company's success depends on their assets which are their employees and they are the pillars of the company.
So HRM gives a competitive edge to the organistaion
8th September 2016 From India, Jalalpur