Another view regarding this issue is that Human Resources (employees) within an organisation can learn, think and create ideas. Which no other resources can do. Therefore as knowledge is a skill that will lead to improved organisational performance, and human resources within the company are the only resources with this skill, HRM and organisational performance are linked.
This unique resource is not currently being utilised in many organisations, and it could be argued that by using the people within the organisation to their full potential, there would be an improvement in the firm’s bottom line. An example of a company that has tried to make the most of this knowledge is Shell International Exploration and Production (SIEP). SIEP has a history of investing in HRM, and a recent addition to this is a knowledge-sharing scheme that they have put in place globally.
Since 1998, SIEP have set up 11 global-knowledge networks, they cover the core business, plus support functions, such as HR, Finance, IT and Procurement. These are now one of the key learning tools within SIEP. This is a web-based tool, and each section of the business has it’s own community of users. Each community had a co-ordinator for controlling the content and encourages people to contribute to the network. Employees can ask questions on the network, and receive answers from other Shell employees across the world.
Answers are archived, therefore when you have a problem, you can look through the archives to see if you can find an answer, if it is not on there, then you can post a question. An example of the success of this, is Shell in Brazil required help, when a broken tool was stuck in the borehole, ideas were posted from all over the world, via the global knowledge network, and Shell Brazil received answers world wide, which resulted in savings of US $ 7 million.
In total this scheme has saved SIEP over 134 million, plus other savings that cannot be measured. There were some difficulties when implementing the system. Mainly due to employees giving up their time, and their knowledge, as knowledge or ‘trade secrets’ are seen as the reason that they are in their positions, if everyone knew what they knew, then they would not have any advantages when it comes to promotion etc. However SIEP overcame this by recognising employees that shared knowledge as Company Experts.
Another drawback was that employees did not want to look as if they didn’t know what they were talking about, when asking for help, but this was over overcome by careful screening of questions and the extensive archive information. This case study shows that by using employees to the full potential, and recognising that they have more skills then just carrying out tasks, SIEP has been able to implement a HR system, or knowledge-sharing scheme, which has directly led to saving millions of pounds. Therefore directly improving the firm’s bottom line.
In conclusion, from analysing the evidence available, it appears the HRM does have an impact on the firm’s bottom line. It is clear from the research that there are many different theories behind why HRM has such an impact. However from this research I feel that it is difficult to see any distinct or measurable relationship between HRM and organisational performance. Due to the complex nature of HRM, and that fact that it is impractical to separate HRM impacts from all other functions within the organisation, it is impossible to measure this impact.
However the arguments for this link are rational and logical, and it makes sense that Human Resources within an organisation, have the ability to impact organisational performance. Therefore the way in which the Human Resources within the organisation are managed is also going to have an impact, although is it necessary to provide evidence for this?
Addiston J. T. ; Belfield C. R (2001) ‘Updating the Determinants of Firm Performance: Estimation using the 1998 UK Workplace Employee Relations Survey’, British Journal of Insutrial Relations, September vol.39, no. 3, pp. 341-366 (26) Becker, B. and Gerhart, B (1996) ‘The impact of human resource management on organisational performance’ Academy of Management Journal 39 (4), pp. 779-801.
Carrington, L (2002) ‘Oiling the Wheels’ People Management, June 2002 pp. 30-34 How can HRM policies effect a firm’s bottom line? Critically evaluate the evidence that claims to show a link between HRM practises and superior organisational performance.