CHAPTER 7

High Performance Work Systems

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“The ability to successfully create a high performance work culture and striking the right balance of work life harmony, where our employees are very passionate to deliver their best, while staying delighted and engaged at work, makes us the best employer.”

 

Kristyl Bhesania as Tata AIA Life Insurance senior vice president and head of human resources in 2016.

CHAPTER OUTLINE
  • High performance systems
  • Culture
  • Selective hiring
  • Self-managed teams
  • Leadership
LEARNING OUTCOMES
  • Meaning of HPWS
  • Model
  • Characteristics
  • Steps to develop HPWS
  • HR policies and practices

OPENING CASE

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Whirlpool is one of the “Great Places to work for.” It entered India in the late 1980s and as a part of its expansion strategy, positioned itself as one of the leading home appliances manufacturer and marketer in India. It is committed to provide forward-looking solution to the customers. The company believes in high performing culture. The company supports the learning culture by providing continuous learning programs and assigning challenging tasks. Talent identification and development are promoted by identifying the star performers or purple squirrels and assigning them on fast-track development. The leadership pipeline is developed by assessing the leadership skills and then classifying the employees on basis of performance as well as potential. Based on the classification, the employees with potential are imparted leadership development training. The company promotes transparency, trust, team work, empowerment, and freedom. The company’s increasing revenues and profitability are the outcome of its coherent and high performance work culture. Lets see what makes the high performance work systems (HPWSs). Do High-performance work systems make Whirlpool a ‘Great Place to Work for’?

INTRODUCTION

Today, companies confront constant pressure to improve performance. While maintaining the highest standards of quality, they are required to reduce costs and also shorten cycle time. They must bring new products to market faster and provide service that exceeds customer expectations. As the bar is raised on these performance standards, many companies have become interested in HPWSs: what they are, how they improve performance and, perhaps most important, how they can be implemented successfully.

HPWSs, sometimes known as high involvement or high commitment organisations, are organisations that use a distinctive managerial approach that enables high performance through people.

 

HPWSs, sometimes known as high involvement or high commitment organisations, are organisations that use a distinctive managerial approach that enables high performance through people.

HPWSs involve particular patterns of work structures, practices, and processes. HPWSs are the work systems that maximize the fit between the social (employees and structure) and technological systems. Fit or alignment between employees, technologies, and organisational strategy is considered as a key factor in the competitive advantage of an organisation. This alignment leads to specific combination of human resource (HR) practices, work structures, and processes that maximizes the knowledge, skills, commitment, flexibility, and resilience of employees. “System” is the key term. HPWSs are composed of many interrelated parts that complement one another to reach the goals of an organisation, large or small. It is a system of interrelated parts which must function as a whole to reach the goals of the organisation. In other words, one part of the organisation cannot be changed without other parts being affected: the implementation of HPWSs relies on a system perspective.

 

HPWSs involve particular patterns of work structures, practices, and processes.

The concept of HPWS mainly focuses on employee involvement and organisational commitment and it has a long history dating back to the Human Relations and Tavistock Socio-Technical Schools, as well as the quality of working life movement of the 1970s. The HPWS concept first evolved in the United States. In the 1970s and 1980s, with the rise of Japanese “lean-production” systems, US firms found that their HRM systems did not fit with their competitive context. To survive, US firms introduced HPWS to their workplaces. In addition to the above challenges, the advent of advanced manufacturing technology (AMT) and the rise of “offshoring” to low-cost producers like China and India encouraged the application of HPWS to business organisations over the last 25 years. Most interestingly now the concept of HPWS is not limited to the field of HRM or strategic HRM but can be seen in the fields of labour economics, industrial or employment relations, organisational behaviour, and operations management.

 

The notion of HPWS was originally developed by David Nadler to capture an organisation’s “architecture,” which integrates technical and social aspects of work.

A MODEL OF HPWS

Strategic approach: It is assumed that an organisation’s consistency of strategic approach helps determine its success. This consistency can be measured to see how well the organisation “walks the talk.” High-performance organisations tend to establish clear visions that are supported by flexible and achievable strategic plans. They also have clearly articulated philosophies that set the standards for everyone’s behaviour. In addition, they have leaders, managers, and employees who behave consistently with the strategic plan and the company’s philosophy.

 

Strategic approach: tend to establish clear visions that are supported by flexible and achievable strategic plans.

Customer approach: High-performance organisations tend to have clear approaches to obtaining new customers, treating current customers, and retaining customers. They also build the necessary infrastructure and processes to support their customer approach.

 

Customer approach: tend to have clear approaches to obtaining new customers, treating current customers, and retaining customers.

Leadership approach: This describes the organisation’s strategy in managing people to achieve a particular set of behaviours. High-performance organisations tend to be clear about what behaviours employees must exhibit to execute the organisation’s and departmental strategies. Executives and managers set clear goals, understand employees’ abilities, and guide their performance.

 

Leadership approach: organisations tend to be clear about what behaviours employees must exhibit to execute the organisation’s and departmental strategies.

Processes and structure: This captures how organisations arrange their work processes, policies, and procedures to support and execute strategy. High-performance organisations have processes that reinforce strategy, setting up work flows and tasks that most effectively enable employees to meet internal and external customer needs within the limits of the strategy. Such companies tend to use a wide variety of metrics to gauge the work for each department and the organisation as a whole.

 

Process and structure: tend to arrange their work processes, policies, and procedures to support and execute strategy.

Values and beliefs: These are essential for a company to execute its strategy and achieve its mission. High-performance organisations typically have a set of well-established values that are the deep drivers of employee behaviour and are well understood by the vast majority of the employees. The values and beliefs are embedded in the organisation and are consistent with the company’s approach to leadership.

 

Values and beliefs: tend to have a set of well-established values that are the deep drivers of employee behaviour and are well understood by the vast majority of the employees.

FRAMEWORK OF HPWS

a. Work Flows and Team Work

The work flows are organized around key business processes, and people are often grouped into teams to carry out those processes. For example, when Colgate-Palmolive opened a plant in Cambridge, Ohio, in 1988, it was the company’s first experiment with HPWSs. At its other liquid detergent plants, bottle making was contracted out, and filling, packaging, and other production processes were handled by separate departments. At the Cambridge plant, these steps were designed in a seamless process. Single teams made products from start to finish-from blowing the polyurethane bottles to delivering filled and labeled bottles to the loading dock.

b. Belief in People as Competitive Asset

The HPWSs include a number of HR policies and practices: staffing, training, performance management, compensation, and so on, that are intended to enhance employee skills, knowledge, motivation, and flexibility. These practices take different forms, but are based on the belief that people are a critical competitive asset of the organisation. Federal Express, for example, does not have particularly unusual HR practices. Yet, they have successfully implemented policies that HR professionals have long professed as key to improving human performance. Self-paced video interactive instruction provides employees with up-to-date job knowledge. Pay for knowledge is based on video training and job knowledge testing. Survey feedback is used as a report card by subordinates on their manager’s leadership skills and as a mechanism for employees to suggest solutions to problems. Taken together, these practices enable Fed Ex employees to help the company achieve high performance.

c. New Approaches to lead

The most HPWSs rely on new approaches to leading employees. Often this means fewer levels of management and new roles for managers. Managers become facilitators and integrators and share responsibility for decision making and results with their employees. Eastman Chemical’s experience implementing self-directed teams led them to conclude that change must begin with managers. Managers must be able to coach team members in their new roles. These work, HR, and management practices must be supported by other systems in the organisation. This includes systems for communication, information technology, and measurement. At Fed Ex, employees use performance management systems that trace service performance. Information systems monitor the complete history of a package so employees have the information they need to give customers. Research by Xerox that compared the importance of management leadership versus support systems for the effectiveness of work teams found that management leadership was less effective when no support systems were in place. The support systems even insulated employees from poor management practices (Buren and Werner 1996).

CHARACTERISTICS OF HPWS

The essential characteristics of HPWS are the seven key dimensions identified by Jeffrey Pfeffer in The Human Equation (1998, chapter 3). These are: (1) Employment security. (2) Selective hiring of new personnel. (3) Self-managed teams and decentralization of decision making as the basic principles of organisational design. (4) Comparatively high compensation contingent on organisational 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 organisation.

 

Seven key dimensions: (1) Employment security. (2) Selective hiring of new personnel. (3) Self-managed teams and decentralization of decision making as the basic principles of organisational design. (4) Comparatively high compensation contingent on organisational 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 organisation.

Employment Security

Employment security is fundamental to the implementation of most other high-performance management practices, such as selective hiring, extensive training, information sharing, and delegation. Companies are unlikely to invest the resources in the careful screening and training of new people if those people are not expected to be with the firm long enough for it to recoup these investments. Similarly, delegation of operating authority and the sharing of sensitive performance and strategic information requires trust, and that trust is much more likely to emerge in a system of mutual, long-term commitments.

Selective Hiring

In today’s knowledge economy where “people” have become a competitive advantage for organisations, the entry juncture, that is, recruitment function should be robust and able to hire the right people. This, at the first place requires, the large applicant pool and the clarity about the critical competence required in that pool. The selected candidate should have identified critical competencies consistent with the job profile. While selecting, the focus should be on the competence difficult to develop through training. Besides that, several rounds of screening should be used, to build commitment and to signal that hiring is taken very seriously. To the extent possible, senior people must be involved as a signal of the importance of the hiring activity.

Self-Managed Work Teams

Organisations use self-managed work teams to manage work, especially organisations that have moved away from a vertical hierarchy as a form of control or decision making. Each work team is responsible for its own function and uses its own accountability measures to ensure member contributions. For example, Mumbai-based technology company Mastek has introduced self-managed teams.

Work teams may be based on the model of Swedish manufacturing firms such as Volvo and Saab. Participants in a team have different levels of qualifi-cation, that is, skills and credentials, but still perform a variety of tasks.

Even though a work team manages itself, it may elect a leader. Some work teams choose a leader for a long period of time, others rotate leadership roles, and still others assign a leader based on the project. The bottom line is the team must achieve its performance objectives by using all of the skills of team members.

 

Self-managed work teams: Each work team is responsible for its own function and uses its own accountability measures to ensure member contributions.

High Compensation Contingent on Organisational Performance

Contingent compensation also figures importantly in most HPWSs. Contextual to the industry, sector, region, and the organisation, the different forms of compensation could be used like ESOPs, profit and gain sharing, pay for competence, individual or team incentive. It is a matter of equity and fairness. If an organisation produces greater returns by unharnessing the power of its people, justice suggests that some proportion of those gains should accrue to those who have produced the results as opposed to going solely to the shareholders or management. Second, contingent compensation helps to motivate effort, because people know they will share in the results of their work.

Training

Training is an essential component of HPWSs because these systems rely on front-line employee skill and initiative to identify and resolve problems, to initiate changes in work methods, and to take responsibility for quality. All of this requires a skilled and motivated work force that has the knowledge and capability to perform the requisite tasks.

Reduction of Status Differences

The HPWS encourages work teams. But neither individuals nor teams will feel comfortable or encouraged to contribute their minds as well as their physical energy to the organisation if it has sent signals that they are not both valuable and valued. The HPWS reduces the status differential which divides indiividuals or teams as more valued or less values by the organisation. This is accomplished in two principal ways—symbolically, through the use of language and labels, physical space, and dress, and substantively, in the reduction of the organisation’s degree of wage inequality, particularly across levels. Examples like same parking space for all employees, CEOs salary to be equitable, and so on.

Shared Information

Information sharing is critical to the success of employee empowerment and involvement.

One of the underlying ideas of HPWS is that workers are well acquainted with the nature of their own work and therefore are in the position to recognize problems and devise solutions to them. When employees are given timely information about business performance, plans, and strategies, they are more likely to make good suggestions for improving the business and to cooperate in major organisational changes. They are also likely to feel more committed to new courses of action if they take part in the decision making. If executives do a good job of communicating with employees and create a culture of information sharing, employees are perhaps more likely to be willing (and able) to work toward the goals for the organisation. They will “know more, do more, and contribute more.” Sharing of information may have a dual effect: First, it conveys employees the right meaning that the company trusts them. Second, in order to make informed decision, employees should have access to critical information.

 

Shared information: When employees are given timely information about business performance, plans, and strategies, they are more likely to make good suggestions for improving the business and to cooperate in major organisational changes.

Knowledge Development

Today, the jobs require greater knowledge and skills. The investment in employee learning and development becomes important as they require broad range of competence to work efficiently. Companies have found that employees in HPWSs need to learn in “real time,” on the job, using innovative new approaches to solve novel problems.

Commitment

Management’s commitment and leadership are critical for the development of HPWS. Managers need to support the change effort from the start and continue their support through the entire process. The commitment of both senior and middle managers is needed. If management wants to bring about valued organisational outcomes, it needs to influence employee beliefs, attitudes, and behaviour. Employee behaviour is critical to whether the desired organisational outcomes will be achieved and is influenced by employee perceptions of, and their cognitive and affective responses to, HR practices. Major gaps between management intentions and perceived management actions usually undermine employee trust and loyalty and thus affect performance outcomes.

ESSENTIALS OF HPWS

 

Essentials of HPWS: Synergy, TQM, alignment, process, outcomes.

Synergy

Synergy is defined as “Working together.” Everything working together is the essence of a HPWS. This means putting the pieces of the system together in a way that you get something more than you would from each piece’s working well on its own. Synergy matters because it is increasingly necessary in order to achieve a sustainable competitive advantage. When the components of a high performance system are aligned and people are highly committed, incredible things can happen such as major improvements in productivity, market share, quality, speed, customer and employee satisfaction, and flexibility.

Total Quality Management

TQM has produced positive results in many companies by focusing on high quality throughout the organisation. Indeed, many companies have built their HPWSs on a foundation of total quality. TQM principles provide a common language and a useful process for solving problems. Yet, many companies have found that TQM cannot stand on its own. TQM does not necessarily include self-managed work teams or consider the system changes necessary to sustain high quality.

Industrial Insight 1: QUALITY AT TATA BUSINESS SUPPORT SYSTEM (TBSS)

At TBSS, our endeavour must be to achieve consistently high service standards. This is more than just another  goal—it is indispensable to our well being. We must strive to exceed expectations and create extraordinary values for our clients, at the most competitive price possible. 

To the end, we must build competencies, and commit to train our staff relentlessly. In addition, we must achieve this by

  • driving excellence in our recruitment, training, and staff engagement;
  • ensuring that our policies and procedures guide our actions;
  • toiling to achieve new price performance points without compromising in any of the above areas; and
  • being helpful and considerate toward all our colleagues.

Alignment

Organisations are complex systems with many elements that must be aligned to produce high performance. The types of alignments are discussed below.

 

Alignments: Strategic, Goal, internal, external.

i. Strategic Alignment

An organisation’s strategy must be consistent with its environment, vision and mission, and beliefs and values. Selecting a business strategy is crucial, and this must then be translated into realistic goals for the organisation as a whole. By clearly articulating its values, a company can obtain a better balance between short-term financial objectives and other goals, like customer satisfaction.

ii. Goal Alignment

Goals must be aligned for different levels, units, and processes in the organisation. Goals must first be established for the organisation’s core processes. Next, the goals for each function and department in the organisation need to be related to the organisation’s goals. These goals should also support the contributions of other functions to organisational performance.

iii. Internal Alignment

Once goals are aligned, all internal elements of the HPWS structure, subsystems, processes, and practices must be aligned with those goals.

Internal alignment occurs in two directions. Each component should be aligned vertically with organisational goals. For example, reward and recognition systems should reward people for their contributions to the organisation. Likewise, work, HR, and management subsystems and processes should be aligned horizontally with one another. For instance, measurement and information systems should support each other and provide employees with the necessary feedback to track their progress toward their goals.

Internal fit occurs when all the internal elements of the work system complement and reinforce one another. For example, a best practice in performance appraisal system is in place but the organisation doesn’t integrate with the reward system or training and development need, then the evaluation efforts also become redundant.

As in system, parts are interdependent; changes in one component affect all the other components.

Horizontal fit means testing to make certain that all of the HR practices, work designs, management processes, and technologies complement one another. The synergy achieved through overlapping work and HRs practices is at the heart of what makes a high-performance system effective.

iv. External Alignment

External alignment connotes the situation in which the work system supports the organisation’s goals and strategies. External alignment requires the competitor analysis, organisational values, and employee concerns.

The efforts to achieve vertical fit helps in focussing the design of HPWS on strategic priorities.

Processes

High performance is defined for a particular company by the goals that must be achieved to pursue successfully the business strategies chosen for competitive positioning. With their strategies, goals, and systems aligned, high performance companies achieve step changes in productivity, quality, cycle time, and flexibility through the contributions of work processes and of individual and team efforts. To achieve these outcomes, work, technology, and people need to be properly configured. A work force that is skilled, flexible, informed, motivated, and committed can manage work processes that are aligned with technology.

The synergy achieved through overlapping work and HR practices is at the heart of what makes a high performance system effective. Interrelated practices provide several ways for employees to acquire skills, such as training, job rotation, and participation in problem-solving groups.

Outcomes

The HPWS for different organisations yield different results. The survey of employee involvement and total quality efforts shows that companies with high use of employee involvement and TQM practices had substantially greater financial success than companies with low use of these practices. High-use companies excelled at return on sales (10.3 vs. 6.3), return on assets (6.9 vs. 4.7), return on investments (14.6 vs. 9.0), and return on equity (22.8 vs. 16.6). Further, companies that integrated their TQM and employee involvement practices had much better employee outcomes (satisfaction, quality of work life) and company outcomes (profitability, quality, etc.) than companies that used only one set of practices or failed to integrate both sets. A study of companies with HPWSs in the steel industry found that these companies had 7 percent higher productivity, 13 percent better product quality, and higher service quality than companies with traditional work practices.

STEPS IN DEVELOPING HPWS

Practitioners and consultants who have developed such systems identify the following critical steps in planning, design, and implementation:

  1. Build the case for change.
  2. Define vision, mission, and strategy.
  3. Develop a communications and involvement strategy.
  4. Design or redesign the organisation.
  5. Plan for implementation.
  6. Implement.
  7. Monitor and evaluate progress.
  8. Implement renewal.

Steps in developing HPWS: Build the case for change; define vision, mission, and strategy; develop a communications and involvement strategy; design or redesign the organisation; plan for implementation; implement, monitor and evaluate progress; implement renewal. 

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Figure 7.1: HPWS Framework

Industrial Insight 2: HR PRACTICES AT INFOSYS

Infosys has announced that it will recruit the top 20 percent of students from engineering departments of colleges and rely on a selection process involving a series of tests and interviews. With “catch ‘em young” being the firm’s slogan, it has taken initiatives to expand the available talent pool by working with education regulators and academia in India and abroad.

The company’s “Campus Connect” initiative aims to improve the industry-readiness of students while they pursue a regular education. In the last fiscal, Infosys partnered 250 colleges in India and four universities in China and helped 188 faculty members with specialized courseware.

If you catch “em young you must train them right.” To ensure availability of skills in line with needs, Infosys has set up an extensive training infrastructure. Competencies required are identified and developed along multiple dimensions: technology, domain, leadership, management.

New employees undergo training for 14.5 weeks before being deployed on engagements. The firm has established a “global education center” (GEC) in Mysore to train 4,500 employees simultaneously.

To manage with a young workforce Infosys has a programme to upgrade the skills of its staff across the board.

Last fiscal, the firm launched a “competency certification program” aimed at certifying its employees in various industry domains, technologies, and project management processes. The certifications are mandatory for the future growth of employees.

The attention to skill development has enabled Infosys to become “a role-based” organisation, cutting the number of levels from 15 to 7.

The attention to skill development has enabled Infosys to become “a role-based” organisation, cutting the number of levels from 15 to 7.

Infosys’ HR practices have been assessed at Level 5 of the “people capability maturity model” (PCMM), thus putting it at the forefront of the battle for skill development.

Infosys launched a “competency certification programme” aimed at certifying its employees in various industry domains, technologies and project management processes. The certifications are mandatory for the future growth of employees.

All steps are important, though their sequence may vary. Typically they overlap, and earlier steps need to be revisited as change progresses. The relative emphasis on particular steps depends on the history of the organisation and its strengths and weaknesses.

HR POLICIES AND PRACTICES

Staffing Practices

As has been discussed that the policies have to be aligned with the organisational strategy, it makes more sense to have recruitment and selection policy which helps in attainment of organisational goal and hence HPWS have highly directive recruitment and selection practices. The recruitment has to be both broad and rigorous in order to get the best pool of candidates from which to choose. In fact, keeping the track of Talent inventory has become simpler by the introduction of HRs information systems.

In order to hire the engaged employee, the organisations are emphasizing on the behavioural event interviews (BEIs), which are different from the traditional interview in the way that, BEIs are based on the past experiences of the interviewee, which gives better understanding of his or her potential.

Training and Development

Training and development focuses on ensuring that employees have the skills needed to assume greater responsibility in a high-performance work environment. Typically, the training focuses on technical, problem-solving, and interpersonal skills. Emphasis on teamwork, engagement, and continuous improvement requires that employees develop a broader understanding of work processes performed by others around them rather than rely on just knowing their own jobs.

To accomplish this, organisations increasingly use cross-training which involves training employees in jobs in areas closely related to their own.

Compensation

Since HPWS, have different demands from different employees, the same compensation system is difficult to implement. In order to link pay and performance, HPWSs often include some type of employee incentives. HPWSs can also incorporate skill-based pay plans. By paying employees based on the number of different job skills they have.

The open pay plan, in which everyone knows what everyone else makes, is yet another feature of compensation systems used to create a more egalitarian environment that encourages employee involvement and commitment.

Management Processes And Leadership

The success of HPWS depends on first changing the roles of managers and team leaders.

With fewer layers of management and a focus on team-based organisation, the role of managers and supervisors is substantially different in an environment of HPWSs. Managers and supervisors are seen more as coaches, facilitators, and integrators of team efforts. Rather than autocratically imposing their demands on employees and closely watching to make certain that the workers comply, managers in HPWSs share responsibility for decision making with employees. Typically, the term manager is replaced by the term team leader. In a growing number of cases, leadership is shared among team members. Alternatively, different individuals can assume functional leadership roles when their particular expertise is needed most.

 

Managers and supervisors are seen more as coaches, facilitators, and integrators of team efforts. The term manager is replaced by the term team leader.

Supportive Information Technologies

Communication and information technologies are yet one more piece to be added to the framework of HPWSs. Technologies of various kinds create an infrastructure for communicating and sharing information vital to business performance.

The important point is that HPWSs cannot succeed without timely and accurate communications.

Typically the information needs to be about business plans and goals, unit and corporate operating results, incipient problems and opportunities, and competitive threats.

Industrial Insight 3: SIX NEXT PRACTICES IN HR FROM BEST PRACTICES TO NEXT PRACTICES IN HR

C. Mahalingam (Executive VP and CPO, Symphony Service Corp.) talks about why HR leaders must focus on evolving best practices to next practices that will help organisations move into higher orbits of employee engagement and organisational effectiveness.

Strategy guru C.K. Prahalad is credited with coining the term “next practice” at a time when most management thoughts and concepts were still using the term “best practice.” Given the importance of the people factor for organisational success, it can be hardly be overemphasised that HR leaders must focus on evolving next practices that will help organisations move into higher orbits of employee engagement and organisational effectiveness. In this article, I propose to present a couple of such thoughts and explain why they qualify as next practices.

Next practices offer tremendous competitive advantage as opposed to best practices. The reason is simple. By definition, best practices are specific to a company. So, when we benchmark best practices from other companies and bring them over to our own, we cannot expect the same level of impact. In short, best practices are representative of efficiency while next practices are representative of effectiveness.

Understanding Next Practices

For ease of understanding the context, I will attribute the following to next practices (NPs):

  • NPs represent futuristic best practices.
  • NPs represent an orbital change.
  • NPs are strategic in nature, so closely tied to the strategy of the company.
  • NPs have an impact on investor intangibles. 
  • NPs are difficult to copy or emulate, so provide fairly lasting competitive advantage.

While discussing NPs, let me hasten to mention that these practices do not render best practices irrelevant or unnecessary. Best practices will continue to be of interest to all of us, but they will not be able to provide the leap in advantage that next practices will provide.

Six NPs

I propose to present six NPs in this article in brief. These focus on different domains of HR and require deep understanding before implementation. Also, the focus I am bringing here is on the approach and framework. The real competitive advantage for organisations will emanate from adapting these practices to business plans of companies. 

Next Practice 1: From Employer Branding to Employee Advocacy

Since many years, organisations have been learning about best practices in developing a power employer branding strategy to attract the best talent. Seasoned HR professionals understand implicitly that employer branding is often done with the help of a public-relations focus on “selling the company” to the external world. The focus here is external and the initiative rests solely on the employer. A NP in this area will have to transfer the onus from the employers to the employees! This is by no means easy. This requires extensive investment in internal branding. 

The approach is one of “inside-out” rather than “outside-in.” When employees take on the job of advocating company branding, it gains a lot of credibility and sustainability. The focus is external but the onus remains on the employees. 

This transition will reflect in terms of much higher employee referrals and will result in a blueprint for closing the reality gap between what the employers tom-tom and employees experience. HR leaders should invest in practices such as stay interviews, celebrating diversity and inclusiveness, and strengthening the 4Cs (culture, communication, compensation, and career) through appropriate policies and interventions.

Next Practice 2: From Workforce Management to Talent Management

Talent management has become a clichéd term in HR. It is misunderstood rather than understood. The challenge lies in recognising that there are two sides to the talent management process. One is very operational in nature whereas the other is strategic. While best practices are attempted and discussed in context of the operational side of talent management, NPs, in my view, will stem from recognising and dealing with the strategic side of it. 

When the focus is external but operational, you end up attracting and acquiring talent. Alternatively, when the focus is operational and internal, we get workforce management. Here, you deal with all people activities post onboarding, such as training and development, performance management, administering compensation and rewards, and and so on. On the other hand, if you take a strategic but internal focus, what you get is succession planning. Here, the organisation interprets management of talent as dealing with the high potential target group and grooming its members. The next practice lies in focusing externally and strategically, and that is when you get true talent management. 

The way in which a systematic approach to talent management can make a strategic impact on the organisation is detailed in the seminal work by John W. Boudreau and Peter M. Ramstad titled “Talentship.” This is the decision science for managing talent. Briefly speaking, this strategic approach educates HR professionals on why the “peanut butter approach” (or generic workforce management) will not deliver strategic advantage. It also goes on to determine the pivotal talent pools and the HR interventions required for different such pools keeping in view the framework of “impact-effectiveness efficiency.”

Next Practice 3: From Performance Management to Contribution Management by Maximising Strengths

The past decade has seen several best practices in the area of performance management. This is again borne out of managing the weaknesses of employees to derive value. This approach calls for an effective feedback process and fixing identified employee weaknesses as a route to maximising value.

I propose that the NP of contribution management takes place when you derive value from maximising the strengths that employees bring to work rather than containing their weaknesses. This next practice draws heavily from what is now well known as the “strength-based” movement. From Peter Drucker to Jeffrey Pfeffer, from Martin Seligman to Marcus Buckingham, there has been enormous wisdom made available to organisations that proves that focusing on weaknesses does not help you get the best out of people. The best people contributions will come from focusing on the strengths that people carry to work.

Again, moving to the next practice of contribution management is a time-taking culture-change process. Some of the process interventions that will help make this change happen involve training managers in the feed-forward process as advocated by Marshall Goldsmith and coaching managers to play the Pygmalion game instead of the psychological game “NIGYSOB” (now I got you, you SOB!) that was coined by Eric Berne in his all-time popular title “Games People Play.” 

Next Practice 4: From Individual Competencies to Organisational Capabilities for Strategic Advantage

Borne out of seminal work by Dave Ulrich, organisational capabilities have come to represent a NP in HR as opposed to a great deal of best practices around individual competencies over the last many years. 

Competencies at the individual level will provide strategic advantage to organisations only when they collectively become organisational capabilities such as accountability, shared mindset, learning, leadership, customer focus, collaboration, and so on. Competency frameworks for a long time now have focused on building technical/core competencies. But, there is an increasing realisation that strategic advantage arises out of these core competencies only when ably accompanied by soft people-based organisational capabilities.

Next Practice 5: From The Process of Employee Engagement to the Outcome of Employee Effectiveness

Hay Group has done some seminal work in helping organisations understand that the key to strategic advantage lies in moving from best practices around employee engagement to NPs that expand the orbit of employee effectiveness. More recent studies reveal that employee engagement is a process goal to chase, while employee effectiveness is the outcome goal. It is not difficult to recognise organisations, both in India and overseas, where some of the best places to work are not necessarily the most successful from the perspective of productivity and business outcomes. In fact, a couple of these high engagement organisations recently folded shop due to unimpressive performance and an acquisition arrangement!

HR leaders are well advised to measure how engagement is helping create effective organisations, that have pretty well balanced outcomes in terms of customers, people, and organisational and investor results! The NP here calls for going beyond mere engagement to delivering results through engagement.

Next Practice 6: From Leadership Bench to Leadership Brand

HR guru Dave Ulrich has outlined how organisations have in the past and present focussed on: showcasing celebrity leaders, building a bench for the future, and building competent leaders out of internally available top talent. And there are plenty of best practices in each of these three areas. However, strategic advantage will come when leaders in the arena of HRs start focusing on the NP of building what Dave Ulrich calls the “leadership brand.” This happens when leaders all over the company have been able to demonstrate the ability to translate customer needs into employee behaviours. This arises out of the recognition that rather than firm and product brands, the next decade will offer competitive advantage coming out of the leadership brand.

This implies a few action points for HR leaders. First, we need to clearly define the brand statement for leaders to assimilate and live out. Second, building branded leaders requires that the leadership competency models are redesigned to incorporate leadership differentiators rather than prescribing motherhood competencies that just barely meet the minimal leadership code. 

Leaders in companies like Apple and Google exemplify innovation, leaders working for Wal-Mart breathe in and breathe out cost management, while leaders in Dell and Federal Express live out flawless execution. Branded leaders go beyond the attributes that traditional competency frameworks capture and coach. They deliver results that strategically unique competency differentiators make possible.

So, what Is next for NPs?

The above examples of NPs are just illustrative. HR leaders need to look at every sphere within their vast canvas of people practices in order to identify areas for moving current efforts to significantly higher levels of orbit. And that will be possible only when they start thinking out-of-the-box and architect next practices in the field of HR. The above examples are likely to inspire them to do so. The critical success factor would definitely lie in determining the difference between what is strategically proactive rather than operationally reactive. What better time to do this than now, when HR leaders are in the midst of so much action?

Industrial Insight 4: HR AND THE CEO—HR AND EMPLOYEES—HR AND THE BOTTOM LINE

Pankaj Bansal

Often the HR of a company and its employees have different views on what constitutes a “good company to work for.” What causes this divergence and how can it be addressed?

In general, what “makes a good company” is derived from two sources: A survey designed to evaluate the company and its HR, and the perception of the company’s employees. A company, however, exists in an ecosystem. Employees leaving the company and those who will join it in future are as much a part of the ecosystem as existing employees. Seeking responses from only existing employees would make the findings skewed. A model that captures the total talent pool with the company—former, current, and future employees—will probably give us an accurate picture.

Also, an employee is driven by perception whereas the company (and its HR) is driven by realities. The convergence will happen only if individual perception and company aspiration meet at a common point. We should look at perceptions in the light of aspirations and they together will give us the reality. We can, therefore, call it perception–aspiration–reality (PAR). It’s time to challenge the status quo and build new realties and, if I may say so, they should be at PAR! That said, this year’s Best Companies to Work For study has challenged some conventional wisdom. One of the most interesting findings is how different groups of employees think. For instance:

While creative people in the professions like advertising/PR/media seem to give least importance to their company’s brand value, the administrative staff seem to value it the most.

Finance professionals do not attach importance to the stress at work, but manufacturing sector employees value it a lot.

Similar differences are spotted across regions, salary brackets, education levels, and other parameters.

Management guru C.K. Prahalad talks about serving customers by treating them uniquely through his famous n = 1 strategy. Organisations should treat their employee groups with n = 1 strategy, meaning treating every employee group as a unique entity. “One size does not fit all” is something that HR professionals must realise. The more we bring things at PAR, the better will be the convergence.

What are the thumb rules of good relationship between the CEO (or promoter) and the HR head of a company?

HR often gets caught in “what is the coolest programme” and “what is the most innovative practice.” The question is not about “what” but about “how”. Focussing on the basic rules of business would drive HR from backroom to boardroom. The key basics are:

PRODUCTIVITY: HRs focus on productivity is the key to driving an organisation’s success. HR should help a company strike the right balance between its goals and people. The economic downturn has led companies to focus their HR on productivity.

BOTTOM LINE ORIENTATION: Tie everything to business objectives. So, turn performance management into productivity enhancement; turn training to capability building; compensation management to talent pool cost; hiring to quality of hiring; HR operations to shared services. Make every sub-function of HR measurable and driven through metrics which tie outcomes to business results.

UNDERSTAND THE BUSINESS: HR might be making everything measurable and building fantastic cost benefit analysis (CBA). But if the organisation’s operational objectives are not aligned with what HR is presenting, then the proposals get knocked off in the first instance.

EMPLOYEE ADVOCACY: An understanding of the business is a must, but how HR relays the employee perspective to management is equally important. Whether HR can provide a fair and firm view without losing sight of business is the question which wins the trust and confidence of the management.

Finally, you have to be the best at your core function. All the above is achievable if you have built your credibility by delivering and over-achieving your objectives. After all, the business of business is business.

Does good HR get a premium in recruitment-either in terms of better talent or lower cost or both?

Employer brand is generally viewed as being synonymous with the HR practices of the company and the BT-Indicus-PeopleStrong study clearly indicates that work culture is amongst the top three factors. The study, however, also indicates that compensation is as important for the employees.

We believe that good HR does get a premium on attracting better talent but not in terms of lower cost of hiring. The cost per hire is impacted by HR processes, actions, and programmes. Innovative ways of hiring like recruitment process outsourcing (RPO) will ensure effective and lower cost of hiring. Brand value along with the right processes will together get the right talent and will facilitate cost improvements in hiring.

This does not mean hiring people at lower salaries but at a more effective cost. Often companies with scant attention to HR seem to be doing rather well financially.

What then is the correlation between the quality of HR in a company and its sales and profit growth?

Indian companies have operated in an open economy for less than two decades. We have seen maturity of business processes and markets only since the late 1990s. HR practices reflect this process of maturity. Historically, wherever market competition is hot, talent process maturity is high. Let’s look at the IT industry where competition enhanced the talent processes maturity and HR was able to create a short-term and long-term impact on business.

HR in India is inching toward linking its processes with business outcomes. However, there is a long road ahead. The current situation might create the impression that HR is not able to create an impact, but this is not true. That said, HR will have to focus more on outcome-based practices than remaining a subjective function. Power of HR will not come from the number of people in HR department but from the say it has on organisational decision making and its impact on the bottom line.

Can HR be outsourced? If yes, what part of it and how?

HR and employees interface regularly. Eighty percent of the times, these interactions are administrative and transactional in nature (see graphic on the left). However, from an organisation’s point of view most important HR activities are strategic tasks—the top 10 percent of the pyramid. These strategic activities are the differentiators of an organisation and can make it a better place to work. In reality, most of the HR time is spent on employee life cycle transactions.

Most, if not all, of these processes can be standardised, centralised, and automated through an outsourcing framework. This includes recruitment processes, training, administration, payroll, letter generation, full and final, exit interview, and employee helpdesk. An outsourcing partner can perform these activities with higher reliability and accuracy, lower cost and a faster turnaround time. This frees up a company HRs time for higher level contributions.

Integrating the systems

In HPWSs, the individual practices are particularly valuable in terms of how they help the entire system function as a whole. The careful planning helps ensure that the individual practices fit together and are linked with the overall strategic goals of the organisation. Hence, internal and external alignments are required.

Summary

  • HPWSs, sometimes known as high involvement or high commitment organisations, are organisations that use a distinctive managerial approach that enables high performance through people.
  • HPWS involve particular patterns of work structures, practices, and processes.
  • Strategic approach tends to establish clear visions that are supported by flexible and achievable strategic plans.
  • Customer approach tends to have clear approaches to obtaining new customers, treating current customers, and retaining customers.
  • Leadership approach tends to be clear about what behaviours employees must exhibit to execute the organisation’s and departmental strategies.
  • Process and structure tend to arrange their work processes, policies, and procedures to support and execute strategy.
  • Values and beliefs tends to have a set of well-established values that are the deep drivers of employee behaviour and are well understood by the vast majority of the employees.
  • Seven key dimensions of HPWS are (1) employment security, (2) selective hiring of new personnel, (3) self-managed teams and decentralization of decision making as the basic principles of organisational design, (4) comparatively high compensation contingent on organisational performance, (5) extensive training, (6) reduced status distinctions and barriers, including dress, language, office arrangements, and wage differences across levels, and (7) extensive sharing of financial and performance information throughout the organisation.
  • Self-managed work teams: Each work team is responsible for its own function and uses its own accountability measures to ensure member contributions.
  • Essentials of HPWS are synergy, TQM, alignment, process, outcomes.
  • Steps in developing HPWS are build the case for change; define vision, mission, and strategy; develop a communications and involvement strategy; design or redesign the organisation; plan for implementation; implement; monitor and evaluate progress; implement renewal.
  • Managers and supervisors are seen more as coaches, facilitators, and integrators of team efforts. The term manager is replaced by the term team leader.

References

American Management association. How to build a high-performance. A Global Study of Current Trends and Future Possibilities 2007–2017.

Belcourt, Bohlander, Snell (2011). Part 6 Expanding Human Resources Management Horizons Creating High-Performance Work Systems16.ISBN-10:0176501789.

Boxall and Macky (2007). High-performance work systems and organisational performance: Bridging theory and practice. Asia Pacific Journal of Human Resources 2007 45(3).

Business Today.(2010). HR and the CEO…HR and Employees…HR and the Bottom Line… Pankaj Bansal Edition: February 7, 2010.

Dushar Dayarathna (2012). High performance work systems for high performance companies. Business Times.

Kling, Jeffrey.(1995). High Performance Work Systems and Firm Performance. Monthly Labor Review, May 1995, 29–36.

Lawler, III (1995). Creating high performance organisations : practices and results of employee involvement and Total Quality Management in Fortune 1000 companies.1st. Ed. San Francisco : Jossey-Bass. ISBN.0787901717.

Liu (2010). High Performance Work Systems and Firm Performance: The Moderator Role of Industry and Organisational Characteristics. Thesis.

Parsons, Chuck and Necochea, Raul. (2007). High Performance Work Systems in the Paper Industry. PaperAge. pp.29.

Pfeffer. (1998). Seven Practices of Successful Organisations. California Management Review Vol.  0, No. 2. Pp.96.

The Human Factor.(2009). SIX NEXT PRACTICES IN HR From Best Practices To Next Practices In HR C. Mahalingam (Executive VP and CPO, Symphony Service Corp).

Tomer. (2001). Understanding High Performance Work Systems: The Joint Contribution of Economics and Human Resource Management. The Journal of Socio-Economics. Volume: 30 (1).pp. 63–73.

Van Buren and Werner(1996). “High Performance Work Systems,” B&E Review: 15–23.

www.gallup.com Survey on Engagement of employees.

www.tata-bss.com, Values & Mission, accessed July 2018.

Van Buren and Werner (1996).

www.rediff.com

The Human Factor. July 2009.

Business Today, February 2010.

http://businesscasestudies.co.uk

Review Questions

  1. What do you understand by high performance work organisation?
  2. Explain HPWS model and also discuss about the characteristics of HPWS.
  3. Discuss the steps of developing HPWS.
  4. What are the essential elements of HPWS?
  5. Discuss about the HPWS at Infosys.

Time to Apply Theory to Practice: Assignment

Prepare a Report with the following details:

  1. Top 10 companies which are considered as having HPWS.
  2. Browse their web sites and annual reports and comment upon their employee strategies and also report the attrition rate and organisational performance for the given year.

Critical and Analytical Thinking: Siemens: Organisational Culture and Values

The culture of an organisation is the typical way of doing things in the organisation. It particularly relates to behaviour patterns and relationships.

The culture of an organisation develops over time. It is created by the people that work for the organisation its managers and workforce. What the organisation stands for (its values) and the dreams that it seeks to turn into reality (its vision) are fundamental in creating a dynamic culture.

A “high performance culture” exists when everyone in the organisation shares the same vision and where they trust and value each other’s contribution.

This case study looks at how the Siemens organisation is built on a high performance culture. This is shared by everyone from the most senior executive to the newest trainee.

Background to Siemens

Siemens AG is a global electrical and electronics business with a turnover of nearly £60 billion. The company employs just under half a million people around the world. It is based in Munich, Germany. In the UK, Siemens has its headquarters in Bracknell, Berkshire and has around 100 sites across the UK employing 20,000 people.

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Siemens’ products affect our lives in many ways. We can toast bread in a Siemens toaster powered by electricity generated and distributed by Siemens. Traffic lights are made by Siemens and people in hospitals have life-saving MRI scans using Siemens advanced medical imaging technology.

Delivering the HR Development Strategy

HR development is all about helping people to fulfil themselves at work. Development is concerned with encouraging employees to identify ways in which they want to improve their careers and other aspects of their working lives. For example, they may want to attend training courses, they may want to do more interesting work, or they may simply want to have a better work/life balance.

An organisation is nothing without its people. As an employer of one of the world’s most efficient and motivated workforces, Siemens is committed to its employees. Its half a million employees work in a broad range of roles. These include

  • information technology specialists,
  • mechanical and electrical engineers,
  • researchers,
  • new product developers,
  • managers and business executives,
  • administrators,
  • security guards and health and safety experts,
  • HR specialists.

What is “Engagement”?

If people are properly managed, they will motivate themselves to do a good job. Siemens believes in the full engagement of people in the workplace.  Excellent people need to be managed in an excellent way. Siemens believes that engagement combines commitment and organisational citizenship. Engagement is another way of saying actively involved.

HR Development Strategy

All organisations need to have a sense of direction which is put into action through a plan. This plan is referred to as a business strategy.

A key pillar of the Siemens’ strategy, alongside performance and portfolio, operational excellence and corporate responsibility, is the way it manages, develops, and motivates its employees.

The Importance of People in the Organisation

The part of the Siemens’ business strategy that relates to people management is referred to as people excellence. At the heart of people excellence is the building of a high performance culture. Nothing helps an individual more than to be given responsibility and to know they are trusted.

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Almost without exception, people management theorists have shown that real motivation comes from within an individual. Individuals develop such motivation when they feel that their efforts are valued and that they are doing something worthwhile. This is why people excellence at Siemens is so important.

Feeling part of a successful team is part of the engagement process. Individuals who feel valued want to contribute to the success of the organisation.

For Siemens, people, like its technology and innovation, are a source of competitive advantage. To make the most of this advantage, Siemens makes sure that its employees work on developing the company’s heritage of innovation.

Siemens believes that there are many ways to make people feel valued and engaged. These range from a pat on the back, a personal letter or a special mention in a meeting, to a promotion or a higher salary.

Creating a High Performance Culture

Siemens’ operations are based on a teamwork culture. This emphasis on the team is set out clearly in a quote from the global CEO of Siemens, Klaus Kleinfeld:

“Many times in my life I have seen how one individual can make a big difference, particularly when working in a great team. The quality of our people and of our teams is our most valuable resource, particularly in today’s changing world where knowledge flows round the globe with lightning speed and is easily available.”

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Siemens wants all of its employees to be truly involved in the business and to feel part of its success. Employees therefore need to know how they fit into the business. With this in mind Siemens establishes clear expectations.

Team and Individual Targets

Targets for individuals are related to targets for the whole business. Everyone plays their part in achieving great results. Siemens states that “our business success depends on the performance of each individual, our teams and the total organisation.”

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A high performance team is one in which all members of the team work toward shared targets and have a sense of shared responsibility for the results the team achieves. As the team performance improves over time, the better the results.

People Excellence

People excellence is the part of Siemens’ global action plan concerned with HR development. It consists of four main elements:

  1. Achieving a high performance culture,
  2. Increasing the global talent pool,
  3. Strengthening expert careers, and
  4. Siemens’ Leadership Excellence Programme.

The high performance culture is the way of working at Siemens and it involves everyone. The global talent pool is made up of all Siemens’ employees. Within Siemens everyone has the opportunity to develop their own specialism and to acquire further expertise. The SLE provides the highest calibre leadership and management training.

Talent Management-Managing People

People excellence involves developing everybody that works for your organisation not just the high-fliers.

Siemens’ talent management philosophy involves making sure that every employee is provided with the guidance and support to achieve their full potential. This aids them to do their best, every day.

Everyone works together to achieve the organisation’s objectives as well as meeting their own personal goals. Everyone shares the same vision and dreams. Within this culture they are able to progress and take on greater responsibility within the company.

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Talent Managment

Everyone has talent. For Siemens, matching talent with tasks produces competitive advantage.

Each individual at Siemens can make best use of their talents, whatever they may be. Talent management enables both:

  • Job enrichment, where individuals are encouraged to take on extra tasks and Responsibilities within an existing job role to make work more rewarding and
  • Job enlargement, where the scope of the existing job is extended to give a broader range of responsibility, plus extra knowledge and skills development.

Talent management is a global philosophy that is a key part of supporting each of the elements of the Siemens’ business strategy. Talent management enables Siemens’ managers to engage and motivate employees throughout the organisation.

The Benefits of Talent Management

By applying talent management to all staff:

  • All customer-facing staff are engaged, so all customers benefit.
  • Everyone has the opportunity and choices to achieve their full potential.
  • The pipeline of highfliers is sustained.

Performance Management

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Siemens has created a standard process for managing the performance and development of all employees. This is referred to as the performance management process.

The process creates a direct link between the strategy of the whole organisation and plans for each individual. Every individual is given targets based on their role and responsibility within the organisation. It is through meeting personal targets that the individual is best able to help the organisation to achieve its targets.

Performance management is a systematic process that creates trust and open communication by

  • setting objectives,
  • monitoring progress made,
  • creating an ongoing dialogue between each team member and his or her manager, and
  • enabling forthright discussion.

Performance management in Siemens is the engine that drives talent management. It is the cornerstone of its high performance culture. When carried out in a consistent way, this system makes sure that everyone is told honestly about their performance.

Employees are clear about the impact of their performance and what the consequences are for their development. Everyone within the organisation is pulling together to achieve the business strategy.

CONCLUSION

People really matter. Organisational results stem from high performance. People only perform well when they operate in a culture which nurtures and supports them and helps them to work toward the achievement of their ambitions.

Siemens’ high performance culture provides the framework and support in which high performance people can show their commitment to a high performance organisation.

© Copyright Business Case Studies LLP. Reproduced by permission of the publisher.

Internet Sources for Reference

Questions

  1. Analyse the Siemen’s practices towards building the high performance organisation.
  2. Explain the importance of human capital in developing high performance organisation.

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