Human Resource Management Practices (HRM Practices)

Human resource management is defined as the involvement of all management decisions and practices that directly influence people who work for an organization (Fisher, et al., 1990). Traditionally, human resource management is something which an organization has used to deal with staff activity (Fulmer, 1990). Traditional human resource practices have never been paid much attention as a main driving of organizational success by top management.

When business people, traditionally, talked about how to win in markets, they intuitively think of roles of their financial functions, power of production processes and marketing strategies. Commonly, tangible resources and capabilities are preferred to achieve the goals and objectives. Human resource department was treated as a follower rather than initiator. This was a very big mistake that they had ignored this lever of intangible resources. Ahmad and Schroeder (2003, p. 19) said, “sophisticated technologies and innovative manufacturing practices alone can do very little to enhance operational performance unless the requisite human resource management (HRM) practices are in place to form a consistent socio-technical system.”

The realization of importance of human resource functions, policies, and practices, spreads widely among academics and practitioners. Application of HRM into business practices by managers has been seen significant; topic on how HRM practices help improve firm performance is amazingly cumulative (e.g. Chang & Chen, 2002; Youndt, Snell, Dean, Jr., & Lepak, 1996; Huselid, Jackson, & Schuler, 1997, Pfeffer, 1998, Wan, Kok, & Ong, 2002; Becker & Gerhart, 1996; etc). These empirical and theoretical researches recommended that HRM be playing a proactive role in an organization rather than reactive and should be, as well, considered to be a strategic partner in strategic formulation and implementation (Schuler & MacMillan, 1984; Ulrich, 1987).

Drawing on the past studies by different scholars of HRM field such as Arthur (1992), Pfeffer (1994), Delaney, Lewin, & Ichniowski (1989), Huselid (1995), MacDuffie (1995), this study identified nine HRM dimensions. They are: HR planning, staffing, appraisal, compensation, training, team work, employee participation, employment security, and status barriers.

1. Planning workforce (HR planning) is a process of investigating supply and demand of current and future labor situations. Firms need to predict supply of labor to match with demand condition in the coming years. What is the rate of availability of future workforce? Are there enough potential young workers in labor market, in the next two years or five years? What is the level of education of those potential workers? Do firms need to help invest in educational system to help upgrade education of the potential workers or not? Whether investment in national training and development of the workforce is required? (As Texas Instruments and New York Telephone did) (Schuler & MacMillan, 1984). Without these preparations, firms will not be able to respond to labor fluctuation.
2. Staffing is a process of searching for new people, selecting employees, and assigning the new hires to particular jobs in an organization (Schneider & Schmitt, 1986). Staffing is very important and should be implemented carefully to get right people for right places to help bring growth to the organization through increasing in employees’ productivity. An organization needs to take into consideration the fitness of potential employees into an organizational culture (Pfeffer, 1998); otherwise, demoralization in a workplace and disgruntled and low productive employees will lead an organization to troubles. Socialization is about introducing culture and ways of doing works of an organization to new employees. When it’s done successfully, it constitutes enormously loyal employees who are committed to the company (Schuler & MacMillan, 1984). Few questions are proposed by Ulrich (1987) to understand staffing activity: How are potential employees recruited and socialized? What is a career path? What are processes of succession planning within an organization?
3. Compensation or Incentives: There are three kinds of compensation plan: First is base-compensation (fixed pay to employees). Second is pay incentives (bonuses and profit sharing). Third is indirect compensation (health insurance, vocation, unemployment compensation) (Gómer-Mejía, et al., 2004). Commonly, compensation is based on two categories: financial incentives and non-financial incentives. The purpose of compensation offering is to motivate employees to work harder and help an organization to achieve goals. Compensation can be used to explore competitive advantage (Gómer-Mejía & Wellbourne, 1988). The reason why compensation policy can ensure better organizational performance is because it can attract and retain high talented employees (Pfeffer, 1998). So, decision on how firms pays to employees is vital; it can absorb high skill people or bring down motivation of current employees.
4. Appraisal process is used to evaluate employee performance. The appraisal system helps top level of management to be able to clarify organizational objectives and expectation to internal employees and helps understand ability of its own workforce. Application of appraising into an organization is to make the entity able to identify poor performances, skill deficits, room for improvements, and training and development needed for internal employees. Performance appraisal system, as Gómer-Mejía, Balkin & Cardy (2004) mentioned, can be used for administrative purposes which are related to employee’s work condition, including promotion, termination, and rewards. Ulrich (1987) raised three questions associated with appraisal system: What sort of work standards are provided to employees, behavioral or outcome standard? What kind of feedback to employee, positive or negative? What processes are adopted to ensure continuous feedback to employees on regular basic, monthly, quarterly, and yearly? One thing which an organization needs to do is to ensure that feedbacks are not bias and help encourage commitment. Some scholars and managers argued that performance appraisal brings demoralization to a workplace and low productive, and should be eliminated from practices (Williams, 1997). Appraisal system is considered as bias process because it is related to rater error and bias, the influence of liking, organizational politics (value of workers’ performance depends on the agenda or goals of supervisor), and legal issue (Gómer-Mejía, et al., 2004). That’s why appraisal system is used in the most careful way.
5. Training: The purposes of training are to improve current skill of workers and to correct skill deficits (Gómer-Mejía, et al., 2004). Training can influence performance in two ways: first, training improves relevant skills and abilities; second, training increases employees’ satisfaction with their current jobs and workplace (Harel & Tzafrir, 1999). The aim of training is to build competencies of employees through job rotation, counseling, cross-functional exchange, or task assignments (Ulrich, 1987). Coaching, mentoring, and instructing are crucial parts of training tool. Schuler and Jackson (1987) mentioned about choices of training whether it is for short-term or long-term, narrow application or broad view, productivity focus or quality of work life emphasis, individual oriented or group oriented, low participation or high involvement and planned or unplanned. Kydd and Oppenheim (1990) said that HR managers facing with respects to formal training were how much and in what areas. There are several kinds of training criteria. Training consists of on job-training, off job training, formal training, skill training, cross-functional training, team-training, literacy training, etc (Gómer-Mejía, et al., 2004). Computer-based training (CBT) is very attractive in research and practical areas. Most of practitioners suggested that computer-based training is a useful way to promote productivity of employee’s learning. Recommendation of new direction of HRM research should take information system into account (Ferris, et al., 1999).
6. Team work: Group of employee is created on purpose of doing a particular job or solving problems is called team work. The idea of team work is people share knowledge, skill, judgment, and idea among one another to get better results. Chang and Chen (2002) found positive relationship between team work and employee productivity. Team-building and problem-solving group are very important to link strategic to operational goals (Steven, 1995). According to Pfeffer (1998), team works provide many advantages: first, teams depend on peer-based work rather than hierarchical, which leads to more effective achievement; second, team work facilitates flows of idea from team members and finally, comes up with innovating solution; third, teams help save some administrative costs resulted from paying specialists to watch people.
7. Employee participation: The most powerful achievement of workplace of organization is when employees participation in the work process. Employee participation is the level of influence of individual employees has on both decision making and factors associated with decision process (Verma, 1995). Involvement can be more effective when resources are provided by top management along with authority.
8. Status barriers: Firms should decide whether employees inside are treated equally or not, wearing ties, or eating in the same or different cafeteria (Pfeffer, 1998). All these things, firms need to consider. Less status differences tends to persuade employees to worker harder and commit more to the organization because they feel that they belong and part of working family, leading to high productive and tending to reduce costs of work errors.
9. Employment security is the level of job guaranteed by organizations to inside employees. Employment security is important to determine work productivity of employees. The higher degree of job security offered to employees, the more commitment an organization receives from them. According to Pfeffer, quick lay-off at the first sign of financial difficulty makes firms bear costs of good job selecting, training, and development. Layoffs are dangerous to allow competitors to attract firms’ employees away (Pfeffer, 1998). In rapid change economy, even senior employees are also subject to layoff procedure (Delery & Doty, 1996).

Besides these HRM dimensions, there are still other HRM practices which are heavily emphasized in research and practice. Table 2-1 shows some of original HRM practice dimensions by different authors.