Relationship Between Hrm And Organisational Performance Management Essay

In light of the current economic climate, it may be very tempting to overestimate the impact that Human Resources Management (HRM) can play in ensuring the National Health Service’s (NHS) ability to deliver healthcare for all UK citizens based on their need for healthcare rather than their ability to pay.

Any organisation requires a complex array of resources – human, financial and material – to grow, survive and achieve its goals. As HRM theory has evolved and developed, the belief that investment in HRM policy and practice can make a significant positive contribution to organisational performance has come to be widely circulated if not fully accepted. There is a growing consensus that effective management of human capital is critical to an organisation’s success (Barney & Wright, 1998; Jackson, Hitt & DeNisi, 2003;). With the current economic slowdown, investment in human resources is being touted as answer to the stagnation if not reduction in financial and material resources available to public sector bodies including the NHS.

One recent multi-sector review of research on the relationship between HRM and organisational performance reported that “more than 30 studies carried out in the UK and US since the early 1990s leave no room to doubt that there is a correlation between people management and business performance, that the relationship is positive, and that it is cumulative: the more and the more effective the practices, the better the result” (CIPD 2001).  

This paper will examine this belief by looking at the factors that affect a key performance indicator for the NHS: Patient Outcomes. As stated in Liberating the NHS: Improving outcomes for patients: “The primary purpose of the NHS is to improve the outcomes of healthcare for all: to deliver care that is safer, more effective, and that provides a better experience for patients” (DH2010). Using this definition as a guide, this paper will look to test the hypotheses that ‘good’ HRM policies can lead to safer, more effective care and lead to better patient experience. In order to achieve this aim, the author will attempt to determine exactly what ‘good’ HRM is and then to examine some of the numerous studies on the subject of HRM and see how these have affected patient outcomes with regards to safety, effective treatment and patient experience.

HRM Theory

Healthcare is a sector with some unique characteristics. Due to the complex nature of health, the incredible array of diseases and health problems, the differing needs of treatment / prevention and the breadth of skills and knowledge needed, the NHS has had to recruit an incredibly large, diverse workforce. “There is increasing recognition that health care delivery relies fundamentally on the capacity and capabilities of the workforce” (Hyde, P., et al, 2006,)”. Therefore, one can easily surmise that delivery of health care relies upon the human capacity and capabilities of health care organisations to train, develop, deploy, manage and engage their workforce effectively. Recent trends in the UK have moved away from restructuring and reorganizing health services and towards modernising working practices (Hyde et al., 2005; DH, 2002).

This scene setting hopefully helps explain the growing interest academics, NHS senior management, civil servants at the Department of Health (DH) and politicians into what constitutes ‘good’ HRM policies and practices. However, before one can explore what ‘good’ HRM is, one has to define precisely what HRM is. HRM has been defined as “formal system for the management of people within the organization” (Bateman & Zeithaml, 1993:346). For Inyang, HRM is simply “organization’s activities, which are directed at attracting, developing and maintaining an effective workforce” (Inyang 2001:8). Unfortunately, despite all the growing enthusiasm for HRM, there has, as yet, been no accepted definition of exactly what HRM is. A number of models have been put forward as a means of explaining how HRM can be implemented within an organisation in order to increase organizational performance. Fombrun et al did manage to identify four common HR processes performed in every organization:

Selection: matching people to jobs

Appraisal of performance

Rewards: emphasizing the real importance of pay and other forms of compensation in achieving results

Development of skilled individuals

A number of academics (eg Bailey, 1993; Guest, 1997; Huselid, 1995) have argued that HRM practices can improve company performance by:

increasing employee skills and abilities

promoting positive attitudes and increasing motivation

providing employees with expanded responsibilities so that they can make full use of their skills and abilities.

However, although not so much disputing the value of HRM, but rather the ability to measure the outcomes of HRM interventions in order to establish good practice, Richardson and Thompson (1999) summarised a list of key points from their review of the literature that anyone looking at HRM should keep in mind at all times:

The claims that there is a universal best practice HR strategy “are premature”.

Adopting a specified set of HR policies will not in itself lead to organisational success.

The same “bundle” of HR policies may not be universally applicable.

“How something is done is often more important than what is done” – but existing empirical studies concentrate on the latter.

HRM Models

Michigan School

At the start of the Twentieth century, with the increased spread of industrialisation and capitalism, companies started looking at ways to increase their competitive advantage through staff productivity. Frederick Taylor (“Principles of Scientific Management 1911”) suggested a number of techniques that he claimed could lead to better staff performance. These included wage increases, job specific training, and enforcement of standards derived from work-studies. This type of HRM practice has been commonly referred to in the literature as “Personnel Management”. The Michigan School has taken these principles and attempted to update them in order to make them applicable to the 21st century economic model.

This approach views the Human Resource function as transactional in nature, concerned essentially with providing administrative support to an organisation through staffing, recruitment, compensation and benefits (Rowden, 1999; and Wei, 2006).

Storey Model

In the latter decades of the Twentieth century, as a result of increased economic prosperity and structural changes in the economy (moving away from secondary to tertiary sectors) a new school of thought appeared to challenge Taylorism. A number of studies were published suggesting that the major drivers of productivity increases were non-monetary factors. (Elton Mayo’s Hawthorne Studies, Douglas McGregor’s Theory X and Theory Y, Abraham Maslow’s Hierarchy of Needs). As a result of these, traditional Personnel Departments were replaced by a more dynamic Human Resource approach. This new approach considered workers as valuable resources rather than as easily replaceable ‘cogs’ within a machine. This was later updated from “resources” to “assets”. This reclassification has significant connotations as employees were now seen as a valuable source of competitive advantage.

There has been a separation of traditional transactional Personnel Management activities from new Human Resource functions directly linked to the core business operations. HRM in this model is viewed as a strategic business partner which supports the company’s competitive advantage by providing high quality people and by helping business managers strategically plan the functions of the human capital within the organizations (Rowden, 1999). SHRM reflects a more flexible arrangement and utilization of human resources to achieve organizational goals, and accordingly helps organizations gain competitive advantage (Wei, 2006).

Comparing the two Models

Despite these seemingly different approaches to HRM, the basic raison-d’etre is the same for all three theories: Improving staff performance.

Truss has defined the Michigan School as a ‘Hard’ model of HRM and the Storey Model as a ‘Soft’ model of HRM. Truss commented that: “the soft perspective implies that individuals are viewed as a resource worthy of training and development, whereas the hard perspective implies that individuals are a cost to be minimised.” (Truss 1999)

For Becker & Huselid (2006:899) the traditional HRM differs from SHRM in two important ways: “First, SHRM focuses on organizational performance rather than individual performance. Second, it also emphasizes the role of HR management systems as solutions to business problems (including positive and negative complementarities) rather than individual HR management practices in isolation”.

What these models do agree on however is that HRM policies and practices can influence an organisations ability to meet it current and future needs, attracting and retaining employees, developing the workforce and motivating the staff for better performance.

HRM within the NHS

There have been numerous Government interventions designed to boost the role of HRM within the NHS in order to improve performance. The Government initially set out its programme for workforce development in Working Together: Securing a high quality workforce for the NHS (Department of Health (DH), 1998). This made an explicit link between improved staff conditions and better services, and proposed a series of human resource targets for local NHS organisations. This increase in the role of HRM within the NHS was re-enforced by the HR in the NHS Plan (DH, 2002).

Interestingly enough, in the Objectives section of the document, it is quite clearly outlined that “Unemployment is at its lowest for over a quarter of a century, and many employers, in both the public and private sectors, are recruiting.” As we have already discussed above, this economic situation leads itself much more comfortably to the Storey model than that of the Michigan School. It is therefore of little surprise that the content of the document promotes HRM policies and practices in line with the Storey Model. For example, the main strategy described four pillars on which the goal of ‘more staff, working differently’ would be built (DH, 2002):

Making the NHS a model employer by embracing best policies, practices and facilities

Ensuring the NHS provides a model career through the concept of the Skills Escalator, with an expectation of lifelong learning and development

Improving staff morale

Building people management skills, by developing the capacity and skills of the human resources function.

To support these pillars, the strategy also promised modernisation of the pay structure, learning and professional development, professional regulation and workforce planning. This bundle of policies clearly seeks to align business interest (improved staff performance) to workforce aspirations, which is the basis for the Storey Model. Whether the guiding principles and the mix of policies would be different in the current economic climate with a quasi-freeze on public sector recruitment and a significant increase in the level of unemployed is an interesting debate that unfortunately cannot be covered in this paper.

HRM and Patient Mortality

“First, do no harm” is the guiding principle behind all medical interventions. This reflects the medical profession’s viewpoint that patient safety has always been an important part of quality health care. Professor Michael West and colleagues have conducted groundbreaking research exploring the link between HRM and the overall patient mortality index. Mores specifically, it looked at whether HRM practices could predict changes in patient mortality over time. The results demonstrate that differences in HRM practices can predict an 8% difference in mortality rates. This is a higher figure than either of the more traditional measurements used as indicators used to predict population health (i.e. of ratio of doctors to beds, GP per 100,000 population).

This research also revealed that improvement in appraisal is associated with a reduction of 12.3% of the number of deaths after hip fracture. Appraisals offer a chance for managers to clearly set objectives and helps people be clear about what they are required to do. It also has beneficial consequences by making staff feel valued and supported. (West et al, 2002)

Another finding from the same Professor West research would suggest that acute hospitals with extensive staff training and development policies also resulted lower the patient mortality rates. Staff Training is deemed an important part of HRM as it gives people the confidence and skills to do their jobs. This study suggests that investment in training and development leads to improved safety for patients. (West et al, 2002) The Government has attempted to introduce advances in education and training to support patient safety in an effort to boost NHS staff performance nationally. (DH 2006). This highlights how ‘good’ HRM practices are seen as a central building block to improving performance.

This research would suggest that HRM practices do lead to better patient outcomes. However, there are some limitations to this study that may bring into question the validity of the research (namely sample size variations between analyses and the mortality variables being from different timescales). It may also be possible to question the conclusions reached by Professor West and his colleagues. Another potential explanation for their findings could be that resources in higher mortality rate hospitals have been directed away from HRM towards front line services.

HRM and Patient Satisfaction

Patient satisfaction is predicted by factors relating to caring, empathy, reliability and responsiveness (Tucker and Adams, 2001). Ware et al. (1978) identified dimensions affecting patient evaluations, including physician conduct, service availability, continuity, confidence, efficiency and outcomes. “Evidence from studies into ‘magnet’ hospitals in America – which have been shown to be successful in attracting and retaining nurses – suggests that higher nurse-staffing levels, investments in the education and expertise of nurses, and involving staff in organisational decision-making are critical to building good morale and motivation. Furthermore, once these changes have been effected, they positively affect patient outcomes.” (Aiken et al, 2000)

Reviewing the literature on the topic of staff moral reveals that the factors affecting staff morale and motivation can be grouped into four categories:

Working environment: The environment in which people work (for example, levels of staffing, working hours and the physical setting) (Allen 2001). Degree and speed of reform affects morale and motivation (Bowman 1997)

Feeling valued: Morale and motivation are affected by whether staff feel valued in their own immediate workplace and elsewhere in their organisations (Graham 2001.)

Job satisfaction: Job satisfaction is linked closely with morale and motivation (Graham 2001.) The nature of the job, whether there are opportunities for professional or skills development and what other employment opportunities are available all affect job satisfaction. (Collins 2000)

Resources and pay: How well resourced the service as a whole is, and how individual staff are rewarded, influences morale and motivation (Bevan 2000.) Medical managers, GPs and hospital doctors all report that resource problems have an effect on morale (Graham 2001.)

It is possible to establish a strong correlation between this list and the role that HRM as identified by Fombrun et al as the four common HR processes performed in every organization. Appraisal, Rewards & Development cover these four factors identified by the literature as part of their remit. It is for this reason that HRM practitioners believe that HRM can play such a key role in improving an organisations performance through improving morale and motivation. However, an analysis of staff and inpatient surveys in England has revealed several negative and positive associations between staff moral and patient experience. For example:

Staff intention to leave was associated with work-related pressure and stress

Well-structured staff appraisals were associated with managerial support, job satisfaction and a good working environment

Working extra hours and stress were associated with poorer patient experience across a range of factors

Managerial support, error reporting and availability of hand washing materials were associated with a more positive experience for patients

Positive staff feedback on availability of hand washing materials was reflected in positive patient feedback about the cleanliness of wards/toilets and hand washing by doctors and nurses.

The Healthcare Commission noted that its analysis cannot demonstrate that staff experience impacts directly on patient experience, but that it is also possible for patient experience to impact on staff experience (QUOTE). As we can see from this analysis, good HRM (e.g. appraisals, staffing levels) practices can lead to better staff motivation but the impact this has on patient experience can be described as tenuous at best.

Conclusion

As this paper clearly shows, there is a clear logical link that can be made between HRM and Patient outcomes. As decision makers look to diminish the financial and mechanical resources invested in the NHS as a result of financial constraints, the human resource will be seen as the key to maintaining if not improving performance within the NHS and thus patient outcomes.

HRM can play a significant role in helping the NHS meet it’s stated aim of improving patient outcomes. A link between HRM and patient outcome can be demonstrated which can improve patient outcomes of mortality, effective treatment and satisfaction. The Government has been looking at ways to invest in the Human resource capital for a number of years in economic conditions favouring the employee over the employer. It was therefore logical and right that they implemented policies in line with the model advanced by Storey. In light of the current economic climate, it will be interesting to note whether decision makers will revert to techniques proposed by the Michigan school and if so, what impact will this have on staff performance.

This paper has been able to identify a number ‘good’ HRM policies and practices that did exactly that. Professor West and colleagues were able to demonstrate a clear link between ‘good’ HRM (staff appraisals and training and development) and improved patient outcomes (lower mortality rates). Staff Appraisals and Training & Development is two key components Fombrun et al identified as the four common HR processes performed in every organization. Higher nurse staffing levels in American hospitals improved staff morale and motivation creating an improved patient experience.

However, it is worth remembering the argument proposed by Richardson and Thompson who stated that not all ‘good’ HRM practices and policies are transferable between institutions. It is not because one policy has a strong effect in one institution that it will be as effective across the rest of the NHS. Therefore, although the link between HRM and patient outcomes can be demonstrated, individual managers within the NHS will not be able to implement readily packaged measures of HRM and expect improved performance and improved patient outcomes.