Critical view of High Performance Work Systems

This essay attempts to take a critical view of High Performance Work Systems (HPWS) which have been presented a ‘best practice’ for employers. There is considerable evidence that such systems tend to be associated with enhanced business performance, increased employees’ discretion, satisfaction and skill enhancement etc. This belief has led many employers to adopt HPWS aimed at attaining inimitable competitive advantage. However, the idea of HPWS as ‘best practice’ has come under criticism from various researchers on various counts. The essay takes cognizance of the prospects and implications of HPWS on employers and employees and brings in discussion with regards to the trade unions and role of state.

Various authors have attempted to prepare a list of these ‘best practices’ (often known as ‘bundles’) for example Pfeffer (1994, 1998) developed 16 best practices which were subsequently reduced to seven (1998) i.e. employment security, selective hiring, self-managed teams/ teamworking, high compensation contingent on organizational performance, extensive training, reduction of status differentials, and sharing information; Guest and Hoque (1994) list 23 practices; and MacDuffie (1995) has 11 items (cited by Redman and Wilkinson, 2009, pp.29-31). Lloyd (2006) contends that the concept of HPWS still remains elusive with no general agreement as to what is meant by the HPWO (High Performance Work Organization) especially in light of the differences between high commitment, high involvement and high performance work systems (2006, p.156).

Some researchers (Boxall and Purcell 2008, p.78) believe that it is relatively easy to spot so-called ‘bad’ practices but, it is difficult to get agreement of what the good practices (cited by Redman and Wilkinson 2009, p.31). The list of practices themselves vary and there is no agreement on what constitutes the best practices, such that studies of HPWS vary significantly as to the practices included and sometimes even as to whether a practice is likely to be positively or negatively related to high performance (for example see Becker and Gerhart 1996, p.784).

What is distinctive about the recent literature is that it has increasingly conceptualised such practices as forming coherent systems of mutually reinforcing HR practices that work together synergistically (Drummond 2007, p.193) to enhance organizational performance; and that the performance effect of a system of practices is greater than the sum of the effects of each of the component practices (Becker and Gerhart 1996, p.784). However, the extent to which practices do actually form internally consistent, integrated, coherent and mutually-reinforcing systems in organizations as opposed to being used on an ad hoc or opportunistic basis remains the subject of considerable debate (Huselid, 1995).

Besides the foregoing, there is also debate about whether there is ‘one best system’ for all organizations or whether different systems of practices would be appropriate (Appelbaum et al. 2000). In spite of this ongoing debate, the ‘one best system’ (which belies that there are identifiable set of best practices to manage people) view appeared to have gained the ascendancy (Ramsay et al. 2000, pp.503) mainly because of little support for contingencies system (Becker 1996, p.784). However recent research by Drummond and Stone (2007, p.200) suggests that no one such system is possible and importation of such a system may not be as straightforward as it is sometimes assumed and establishment of HPWS in a business requires customization of ‘bundles’ for fulfill the particular needs of an organization.

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Many authors (for example Applebaum et al., 2001, Huselid, 1995; Lawler et al., 1995) wish to promote High Performance Work Systems (HPWS) that embed new work organization practices in progressive and integrated human resource systems (cited by Thompson 2003, p.363), and resultantly HPWS have been adopted in various countries including USA, UK, New Zealand, Brazil etc. Some authors (Keep, 2000) have gone as far as to suggest that the state should act as a change agent by supporting HPWS, which is an essential component of utilizing employees’ skills to maximum (cited by Lloyd and Payne, 2006). On the other hand critics (Thompson 2003, p.365) point out that most of the research in the area of HPWS treats the notion of organization and employer as ‘unproblematic’ while in reality ‘massive tension’ exists between the degree of stability necessary for HRM and HPWS to operate effectively. According to Thompson, the new employment relationship (HPWS) rests on the idealistic premise that employers will undertake commitment and trust-building measures, focus on investment in human capital through training, enhanced career structures, job stability and performance and skill-based reward measures; providing employees with a long-term stake in the company and a reason to invest in its future; however employers are finding it harder to keep their side of any bargain with employees (2003, p.361).

Recent research carried out by Guest et al. (2003) found that increased use of HR practices was associated with lower labour turnover and higher profit per employee, but not with higher productivity. Guest’s finding on direct (and positive) relationship between HR practices and organizational performance is consonant with similar works by other authors (for instance Appelbaum et al. 2000) who contend that HR practices have a positive impact on employees and improve their orientations to work mainly through increased autonomy, satisfaction and commitment (cited by Harley 2002, pp.421-422).

However quite recently some researchers have found that previous research was void of ‘methodological rigour’ necessary to suggest causality between HR practices and performance; they contend that ‘extreme caution’ should be exercised in inferring direct causal impact of HR practices on performance (see Wright et al. 2005, p.432) because there is uncertainty as to whether HR practices do or do not have a positive impact on performance (2005, p.433).

Research by Way (2002) provides evidence of HPWS’s relations to enhanced firm productivity, however the same has been opposed by other authors who suggest that greater use of HPWS is associated with significant productivity loses (see Guthrie, 2001) and increase labour costs in the form of employee compensation with no effects of HPWS on labour efficiency (Cappelli and Neumark, 2001).

Most of the literature on HPWS is narrowly focused on financial criteria of performance (Redman and Wilkinson 2009, p.30) or the benefits viewed from the financial perspective of employers (Delaney and Godard, 2001); and very few studies examine the broader issue of employee attitudes (or responses) and well-being (Harley 2003, p.419). Ashton and Sung (2002, p.21) agree with this and contend that ‘the workers’ experience has not been studied as intensively’ as the impact of such practices on firm performance (cited by Lloyd, p.155).

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One downside of the HPWS’s is stress which is highlighted in works of various researchers and academicians. In this context, Ashton and Sung (2002) suggest that “work in the HPWO can be stressful if it is not managed carefully” cited by (Lloyd and Payne, 2006; pp.154). Ramsay et al. (2000) find employees face work intensification, insecurity and stress in HPWS. Marchington and Grugulis (2000, pp.1105-6) add that practices such as teamwork or performance-related pay, which appear superficially attractive may not offer universal benefits and empowerment, but actually lead to work intensification and more insidious forms of control.

HPWS provides opportunities for employees to participate in decisions, motivates employees by providing recognition, and enhances employee skills, knowledge, and ability to perform which enhances their commitment to the organization (Caturvedi 2009, p.1231); and at the same time enhance retention of quality employees while encouraging nonperformers to leave the firm (Huselid 1995, p.635). The skills development was found to extend significantly beyond levels defined by technical competence needs in the market and laid particular emphasis upon “soft” skills, such as those relating to internal communication, effective team-working etc. (Drummond 2007, p.198). Critics however opine that training (for skills enhancement) is disproportionately provided to key workers and a tendency to assume that more training equates with higher skills level (Marchington and Grugulis, 2000).

A subtler investigation into ‘the workers’ experience (by Ashton and Sung 2002, p.60) reveals that, in many cases, the HPWS model may only be implemented for the core workforce or certain departments, with many employees still operating under Taylorist conditions (cited by Lloyd and Payne 2006, p.155). This creates not only an HPWS implementation issue but also creates methodological problems for researchers.

Delaney and Godard (2001) pointed out that weak labour laws and absence of union may allow employers to impose HPWS practices unilaterally on workers. On the contrary, the employer may face greater pressure and resistance in the presence of strong laws and trade unions in the wake of any unilateral decision. Rocha (2010, p.86) mentions the case of Brazil where workers managed to increase their social space by pursuing better working conditions, upgrading their skills and improving their salaries mainly by creating uncertainty within management which translated into favorable terms of trade in their negotiations with management.

Extensive review of literature reveals that despite evidence provided by various researchers in favour of HPWSs, there has been deliberate effort (or otherwise) to over-emphasize their utility without highlighting the associated weaknesses and problems. Most of the critics, if not all, despite their concerns regarding the claimed fruits of HPWS, do not go as far to suggest complete discontinuation of HPWSs; their main focus is to challenge the exceedingly rosy picture creature by the proponents and to highlight the lacunae in the research process. It can therefore be surmised that the use of HPWS needs to be adopted by employers with cautious optimism.

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REFERENCES

Becker, B. and Gerhart, B. (1996). ‘The impact of human resource management on organizational performance: progress and prospects’. Academy of Management Journal, Vol.39, No.4, pp.779-801.

Cappelli, P. and Neumark, D. (2001). ‘Do “High-Performance” Work practices improve establishment-level outcomes?’. Industrial and Labour Relations Review, Vol. 54, No. 4, pp. 737-775.

Chaturvedi, S. and Wu, P. (2009). ‘The Role of Procedural Justice and Power Distance in the Relationship Between High Performance Work Systems and Employee Attitudes: A Multilevel Perspective’. Journal of Management, Vol.35, No.5, pp.1228-1247.

Delaney, T. J. and Godard, J. (2001). ‘An Industrial Relations on perspective on the high-performance paradigm’. Human Resource Management Review, Vol. 11, pp. 395-429.

Drummond, I. and Stone, I. (2007). ‘Exploring the potential of high performance work systems in SMEs’. Employee Relations, Vol.29, No.2, pp.192-207. Emerald Group Publishing Limited.

Guest, D., Michie, J., Conway, N. and Sheehan, M. (2003). ‘Human resource management and corporate performance in the UK’. British Journal of Industrial Relations, Vol.41, No.2, pp.291-314.

Guthire, P. J. (2001). ‘High-Involvement Work Practices, Turnover and Productivity: Evidence from NewZealand’. The Academy of Management Journal, Vol. 44, No. 1, pp. 180-190.

Harley, B. (2002). ‘Employee Responses to High Performance Work System Practices: An Analysis of the AWIRS95 Data’. The Journal of Industrial Relations, Vol. 44, No. 3, pp.418-434.

Huselid, M.A. (1995). ‘The impact of human resource management practices on turnover, productivity, and corporate financial performance’. Academy of Management Journal Vol.38 No.3, pp.635-672.

Lloyd, C. and Payne, J. (2006). ‘Goodbye to all that? A critical re-evaluation of the role of the high performance work organisation within the UK skills debate’. Work Employment & Society, Vol. 20, No.1, pp. 151-165.

Marchington, M. and Grugulis, I. (2000). ‘”Best practice” human resource management: perfect opportunity or dangerous illusion?’. International Journal of Human Resource Management, Vol.11, No.6, pp.1104-24.

Ramsay, H., Scholarios, D. and Harley, B. (2000). ‘Employees and high performance work systems: testing inside the black box’. British Journal of Industrial Relations. Vol.38, No.4, pp.501-531.

Redman, T., Wilkinson, A. (2009). ‘Contemporary Human Resource Management: Text and Cases’. 3rd Ed. Pp.11-12, 27-33, 40, 89, 119, 160-1, 178, 209, 215, 280, 312, 371, 407. Prentice Hall.

Rocha, R.S. (2010). ‘Changing the (im)balance of power: High-Performance Work Systems in Brazil. Employee Relations, Vol. 32, No. 1, pp. 74-88. Emerald Group Publishing Limited.

Thompson, P. (2003). ‘Disconnected Capitalism: Or Why Employers Can’t Keep Their Side of the Bargain’. Work Employment Society 2003; 17(2); 359-378. Sage Publications.

Way, A. S. (2002). ‘High-Performance Work System and Intermediate Indicators of Firm Performance with in the U.S. Small business sector’. Journal of Management, Vol. 28, No. 6, pp. 765-785.

Wright, P.M, Gardener, T.M, Moynihan, L.M and Allen, M. (2005). ‘The HR performance relationship: examining causal direction’, Personnel Psychology, Vol.58, No.2, pp.409-446.

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