Evaluating The Extent to Which People and Performance AMO Model has Contributed to the Strategic Human Resource Debate.

Stoik Musah,
LBS.Leicester,
shamsmusah@gmail.com



Strategic HRM system can be seen as an investment. This focuses on developing and maintaining a firm’s strategic infrastructure (Becker et al. 1997). The role of HRM can help the organisation achieve competitive advantage through their people. This is an advantage the organisation has that leads to superior performance relative to current and potential competitors. This therefore produces a significant relationship between HR systems and performance, where HR systems contribute to organisational performance. The ‘bundles’ of integrated HR practices are at the centre of High Performance Work Practices (HPWP). These practices include comprehensive employee recruitment and selection, incentive compensation and performance management, employee involvement and training. These practices will result in improving the knowledge, skills and abilities of the firms’ current and potential employees. This will lead to enhance employee motivation consequently a strategy to retain high quality workforce (Huselid, 1995). The best practice model emphasises the importance of horizontal alignment and vital role of managers in recognising the commitment of their employees which in return will lead to enhance performance, however, best practice approach tends to neglect the external environment on factors that can hinder or enhance organisational performance. The configurational approach has had a major influence on organisational performance as the approach firstly tends to look at the needs of the business and then designs its HR on a continuum to help deliver the business strategy, therefore, enhancing organisational performance.

Barney (1991) Resource Based View claims that HR can be the source of sustained competitive advantage; however, there are four criteria that have to be met. Firstly, the HR system has to add value to the firm production process; therefore, the level of individual performance has to be taken into consideration. Secondly, the skill the firm seeks has to be rare, this will help the firm maintain competitive advantage as this will cause the skills difficult to imitate and reproduce my competitors which is the third criteria of non imitability. Hence, investing in firm specific human capital will decrease this. Lastly, the firm specific skill should not be substitutable by other methods such as technology if it is to maintain a competitive advantage and continuously lead to high level of performance. Wright and McMahan (1992) claim that although these criteria are important in sustaining competitive advantage. The crucial factor is the actual creation of firm specific competitive advantage and then look at how the firm can capitalise on this to potential source of profitability.

High Performance Work Practices have to be tailored to meet an individual organisations specific context to produce high levels of performance. Therefore, in order for these practices to have an impact on organisational performance there needs to horizontal and vertical alignment where HRM systems support the business priorities (Golding, 2007). Support for this comes from Appelbaum (2000) AMO theory of performance. This theory states that performance is the function of employee ability, motivation and opportunity. The theory claims that people will perform well when they are able to do so (because they have the necessary knowledge and skills to the job), they have the motivation to do so (they will do the job because they want to) and finally, there will be enhance performance if their work environment provides the necessary support (for example through functioning technology).

It is therefore important for HR to be ‘fitted’ to business strategy. This can be done in a number of ways take for example the influence HRM practices have on employee skills through the acquisition and retention of the firm capital. Recruitment strategies often include an attempt to sell the organisation as an attractive place to work as this will reach out to a pool of applicants. However, in order to be effective this has to be paired with reliable and valid selection processes to capture high quality staff into the organisation, therefore, increasing the chances of higher profitability and other high performances such as high standard of customer service. Formal and informal training is also necessary in order to further develop the workforce such as coaching, mentoring, on the job experience, management develop can all aid personal as well as business growth. However, these types of training programmes can only be implemented by Walton (1999) refer to as Strategic HRD where there is a supportive learning culture. This will means that HRD will have to take on a more influential role by helping individuals to develop and innovate through activities such as team working. Yet, in order to successfully tap into the tacit knowledge of individual employees there has to be trusting relationships within the organisation, as knowledge is not only a competitive resource for the organisation but also for the individual. By converting tacit knowledge into explicit, this can lead to threats of unemployment for the individual concerned. If anything the firm needs to make sure that strategies are implemented to retain these high quality individuals within the firm as they have the skills and knowledge for innovation which could lead to high levels of performance as well as sustaining competitive advantage in the long term.

Yet it can be argued for these employees to want to share their knowledge as well as continuously performing to high standards, these individual employees need to have some kind of motivation. Employers need to find ways to motivate staff not only to work harder but also smarter. This can be assessed through forms of performance appraisal which will direct employers to evaluate how well individuals or groups are performing. These appraisals can be linked in with incentive compensation schemes that can be aligned to the interest of the employee such as ESOP. Another common form of financial incentive from the best practice model is contingent pay, when an organisation is performing well employees are rewarded accordingly. However, there have been cases where senior managers of poor performing organisations have been rewarded with large pay-off, therefore, eliminating the purpose of the scheme (Golding, 2007). High performance is often initiated when employees work together in teams as they can share high ideas and this can lead to innovation. But tension may arise which has to be managed effectively when trying to implement these schemes within the organisation, as those who traditionally earned good bonuses on an individual systems of performance related pay, do not welcome team based production systems (Appelbaum, 2000).

It is often difficult to see how organisations operating in highly competitive markets, with tight financial control and margins would be able to invest in HR practices that promote best practice model. This can be overcome by implementing non financial strategies such as matching individual skills and potential to the skills that are required by the job. That way even the firms that have limited resources are able to increase high levels of employee satisfaction and commitment which will naturally lead to lower levels of turnover and high levels of performance from these individuals. This is also supported by the balance score card (Kaplan and Norton, 1996) which also contributes to the development of SHRM. The strategy involved is establishing goals and measuring cause and effect relationships as well as the shared understanding between different areas of the business. However, the balanced scorecard has been criticised as it does not have a direct link to productivity therefore, require the acknowledgement of the multidimensional nature of the organisational performance.

Although there has been is a link between SHRM and performance, there is a question of the validity of the research methods that has been used to gather the data such as questionnaires and self reports. This can lead to high levels of subjectivity. Also Wall & Wood found that in 25 of research studies, 21 of the studies had used single respondents as the sole source of data. This again is highly subjective and does not really get a holistic representation of the influence SHRM has on performance. Wall & Wood (2005) argue that in the relationship between SHRM and organisational performance should depend on using large scale, long term research in partnership between research, practitioner and government communities. There is also a lack of empirical evidence for many organisations to implement high commitment model and best practice, as this can be problematic due to the short-termist driven economy, where most organisations are just looking to increase return on shareholders value. Therefore, long term performance is not the focal point for many organisation, only looking to increase performance in the short term, hence integrated SHRM is of little value to these organisations.

In conclusion, SHRM can be seen as an investment and can help the organisation achieve a competitive advantage against current and potential competitors. This superior performance indicates that there is a significant relationship between HR systems and performance, with bundles of integrated HR being at the centre of High Performance Work Practices. These practices must have an impact on organisational performance through horizontal and vertical alignment. However, in order to be highly effective AMO theory of performance needs to be applied within practices, where the employee ability, motivation and opportunity for performance are taken into consideration. This can be achieved through bundles of HR such as training and development, recruitment and selection, reward and recognition. Although these factors play a crucial part on high performance it is also important to ensure that there is a supportive organisational culture and all key stakeholders are involved. The RBV claims that there are four criteria have to be met in order for HR to have a sustainable competitive advantage: HR systems have to be valuable, non imitable, non substitutable as well as be rare to ensure that high performance is maintained and to ensure sustainable competitive advantage.