Analysis of High performance work systems

High-Performance Work Systems’ have been presented as ‘best practice’ for employers, employees and unions. Critically discuss this concept and why this promise might be false.

Since the early 1990’s there has been a massive growth in academic interest in a range of labor management practices like ‘high performance’, high involvement’, or ‘high commitment’ approaches. High Performance Work Systems, sometimes known as high involvement or high commitment organizations, are organizations that use a distinctive managerial approach that enables high performance through people. The essential characteristics are the seven key dimensions identified by Jeffrey Pfeffer (1998). 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 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. The HPWS represents an abandonment of traditional Taylorist models of work design based on limited worker involvement, de-skilled jobs and tight supervision (Wood, 1999). High performance work systems (HPWS) are organizations that utilize a fundamentally different approach to managing than the traditional hierarchical approach associated with mass production/scientific management. At the heart of this emerging approach is a radically different employer-employee relationship. The link between ER systems and organizational performance has been a central motif in the HPWS literature. ER policies and practices coupled with quality management systems can improve performance in terms of financial success, productivity and decreased employee turnover (Farias and Varma, 1998; Guthrie, 2001). Innovative ER practices enhancing productivity comprise elements such as team working, flexible job assignments, employment security, employee involvement and training (Ichniowski et al, 1996).

The main idea of HPWS is to create an organization based on employee involvement, commitment and empowerment, not employee control. In HPWS, workers are to a large degree self-controlled and self-managed. With the help of leaders who develop a clear vision, mission, and goals, HPWS workers are expected to respond in non programmed ways to changing circumstances. High performance work systems are a form of organization in which workers are not agents of principals, are not controlled by structures of incentives, but have become owners or principals in their outlook. Workers in this type of organizational relationship may be able to satisfy their need for self-actualization and experience deep owner motivation. Because these workers are identified with, committed to, and fully participating in the organization, their efforts are expected to be much higher and more effective than those of workers in control-oriented organizations who experience agent motivation. The best example of employee experience as a mediating factor in the HPWS-firm performance equation is the Appelbaum et al. (2000) study of HPWS in the US steel, apparel and medical electronic instruments sectors. This shows the positive links between a small number of HPWS practices, employee satisfaction, employee welfare and organizational performance. There is a growing literature attesting to the positive effective of HPWS on organizations, considerably less literature explores its effects on employees from a critical perspective (Wood, 1999). Research by Ramsay, Scholarios and Harley (2000) indicates that while HPWS practices are associated with some measures of workplace performance, the evidence about the role of advanced ER practices, particularly employee involvement, remains very weak. They note that though there are limitations to the data on the topic, it should not be assumed that both employees and employers are equal beneficiaries of HPWS. Some critics have argued that much of the HPWS advocates’ opinions are written from a managerial perspective and simply examine only the direct relationship between a set of management practices and organizational outcomes (Butler et al., 2004).

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Not every organization has the luxury of suspending operations while changes are put in place. Because change is difficult, and when the ‘old ways’ of doing things are abandoned, many experienced employees might begin to feel like ‘beginners’ on the job. This can be stressful and it can polarize the employees. Employees in restructured workplaces might receive higher levels of intrinsic rewards from work and, at the same time, higher level of stress and anxiety than do those in traditionally organized jobs. Workers in a HPWS have increased autonomy and control over the work process, and work teams have greater responsibility for problem solving than do traditional groups of workers. As a result, workers in these work system might often find their work is more challenging, requires them to be more creative, and makes greater use of their skills. They frequently have more training as well. Thus they tend to report far higher levels of intrinsic rewards from their jobs than other workers. How ever, there is some evidence that these workers also experience higher levels of job related stress (Turnbull, 1988;Dawson and Webb, 1989; Appelbaum et al, 1994). To the extent that work loads have increased as a consequence of work restructuring , and where the elimination of buffers means that workers are required to maintain an excessively past pace of work, the increase in the intensity of work results in higher level of stress( Parker and Slaughter, 1988, Elger, 1990; Berggren,1993). Godard’s study (2004) suggests that the impact of HPWS practices, such as autonomous teams, on worker job satisfaction may, in actual fact, produce negative outcomes. Other studies argue that considerable levels of employee dissatisfaction can be linked with HPWS, particularly when managers use worker involvement and participation as a control mechanism to acquire greater effort from employees. Hence, rather than skill enhancing, this perspective views the techniques used with HPWS more as a mechanism of increased control. However, as mentioned above, only a few studies have provided useful, systematic data informing this debate ( McKinlay and Taylor, 1996; Ramsay et al., 2000; Harley,2002; Danford et al., 2004).

Using survey data from 968 firms in many industries, Huselid (1995) has found evidence consistent with the hypothesis that companies’ use of systems of high performance work practices 1) diminishes their employee turnover and 2) increases their productivity (sales per employee) and corporate financial performance (stock market value to book value). He concludes that “The magnitude of the returns for investment in High Performance Work Practices is substantial. Among the important insights developed by organizational behavior specialists is that “Innovative human resource practices are likely to contribute to improved economic performance only when three conditions are met: when employees possess knowledge and skills that managers lack; when employees are motivated to apply this skill and knowledge through discretionary effort; and when the firm’s business or production strategy can only be achieved when employees contribute such discretionary effort.” (MacDuffie,1995).With regard to HPWS, many organizational experts have found that employees do in fact work harder, smarter, more creatively, and more cooperatively than employees in traditional organizations. Because of these workers’ higher involvement and commitment and their greater control over and say in their work, they work harder (Pfeffer,1998). They also work harder because of contingent compensation that rewards these efforts and because of “peer pressure activated in self-managing teams”. Because of HPWS’ emphasis on developing workers’ skills and competence, these workers’ efforts are also better directed, i.e., smarter. They also work smarter “because of the training and job rotation practices that enhance the opportunity to learn”. Because of HPWS’ emphasis on teamwork, trusting relationships, and innovation, workers’ efforts are more cooperative and creative. Because HPWS place greater responsibility on workers at the operational level, it “saves on administrative overhead [layers of management are eliminated as well as other costs associated with having an alienated work force in an adversarial relationship with management” (Pfeffer,1988). In particular, HPWS reduces employment disputes, and thus, saves on the direct and indirect costs of employment litigation. According to Huselid (1995), because of HPWS organizational structures such as cross-functional teams, job rotation, and quality circles, workers’ cooperative efforts are increased. For these and other reasons, HPWS workers’ efforts are expected to be higher and more effective than for those working in a control-oriented organization. It should also be noted that, according to Lawler (Lawler, 1992), there is likely to be less labor turnover in HPWS simply because of the attractiveness of this type of work environment. According to Argyris (1960), workers in traditional control-oriented organizations will experience frustration, psychological failure, short time perspective, internal conflict, an orientation to a part of the organization rather than to the whole, and counterproductive informal activities because they have little opportunity to be in control of work situations and to exercise their abilities.

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Edwards and Wright (2001) argue that the casual path assumed by most proponents of HPWS is that the systems….are established; they influence workplace practice, employee attitudes change, with increased satisfaction or commitment; there is a consequent effect on behavior; and this in turn fees through to the performance of the work unit eventually the company. Most of the studies have only measured the association between HPWS and organizational performance rather than attempting all the links in the chain (Legge, 2001; Edwards & Wring, 2001). In particular, there are virtually no studies which have explored employee responses to HPWS.

Often HPWPs are viewed as an alternative to traditional productions systems that are firmly rooted in Fredrick Taylor’s scientific management and subsequent Fordist principles. High Performance Work System (HPWS) design has gained tremendous popularity in recent years. Highly turbulent and constantly changing environments have challenged organizations to respond with organization designs that enable sustained levels of high performance. A number of articles and books have been published in recent years on high performance work systems (Arthur, 1994; Pfeffer, 1994; Huselid, 1995; MacDuffie, 1995; Appelbaum et al., 2000; Guthrie, 2001). According to Guthrie (2001) HPWS have two broad implications. First, HPWS will enhance employee retention. Second, the use of HPWS and concomitant investments in employees will likely magnify this effect. The central hypothesis in the HPWS literature is that these work systems create sustained competitive advantage of the organization through people and the processes in which and on which people have to work. Leading organizational behavior specialists believe that HPWS has the greatest potential to provide sustained competitive advantage to companies adopting it.

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However, for all their potential benefits, implementing HPWS is not an easy task. The systems are complex and require a good deal of close partnering among executives, line managers, HR professionals, union representatives and employees. Because HPWS are difficult to implement, successful organizations are difficult to copy.

HPWS are supposed to provide more favorable conditions for employee autonomy, employee participation, skill development and trade union rights at the workplace. In the employee relations literature there are many who argue that the implementation of high performance work system also create opportunities for union renewal, enabling unions to discard their traditional adversarial role in favor of new partnership one. Godard (2004) mentions that the high performance paradigm is best practice not only for employers, but also for workers, and potentially, for their unions.

Unions may also benefit from participating in the introduction of HPWS. Managers in both union and non-union settings have discovered the difficulty of transferring responsibility, authority and accountability to front line workers. This can be accomplished more easily when managers are able to negotiate with worker representatives over the introduction of new workplace practices- an advantage which unions can provide (Collinson et al., 1996). Managers at the plant may lack the knowledge to introduce participatory practices. On the other hand, unions have the resources and expertise to play an active role in the process of organizational change. How ever unions can both enhance and detract from the productivity performance of the workplace or firm. Union presence may lower productivity via: restrictive work practices; industrial action; causing the firm to invest less; and if adversarial industrial relations lower trust and co operation. In UK , where work organizations has traditionally been subject to collective bargaining, agreements over the implementation of employee participation and other work performance practices have sometimes reduced the union’s traditional collective bargaining role to one of consultation(Geary, 1994),and may have reduced the influence of unions on management in the eyes of their members. The mainstream HRM literature, with its more ‘industrial relations friendly approach’, suggests that practices such as HPWS shift relations from conflict to cooperation and can be advantageous to both unions and workers. Indeed, Harley et al.’s (2007) study concludes that workers and unions can benefit from HPWS in the service sector, although it also notes that workers and unions should not necessarily rush forth and embrace HPWS.

Ironically, the literatures on HPWS seem to present an overwhelmingly positive picture, I believe it is important to present some words of caution. Although high performance work practices have often seen as good for both employers and employees, these practices require significant investments .And, it should be noted that there is a possible positive reporting bias in the published work on HPWS initiatives. Thus, HPWS efforts that have resulted in modest success, or even negative results or failure, are likely to go unreported. This could create a biased view of the HPWS phenomenon.

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