The relationship between organizational performance and human resource management (HRM) practices has been discussed and examined by scholars and business administrators. It is believed that the ability to motivate, train or empower workers can give a company a competitive advantage over other firms.
One of the issues that are often studied is the impact of the so-called human resource bundles on the business outcomes, namely productivity, profitability or retention of workers.
In this case, the term bundles can be understood as a set of aligned and interrelated practices and strategies that are supposed to bring mutually enforcing effects on organizational performance (Ahmad & Schroeder 2003, p. 37).
This paper is aimed at determining whether this approach leads to superior outcomes. Overall, one can say that such bundles can indeed have a positive influence on a company provided that managers understand the core values and needs of workers.
At first, it is necessary to focus on the theoretical background of HR bundles and the reasons why approach to HR management has become very popular in many organizations. One of the main assumption is that the activities of an HR managers have to be synergistic (Toh, Morgeson, & Campion 2008, p. 864).
In other words, they have to supplement one another and create an extra value for a company. Scholars provide various examples to support this idea. For instance, companies often develop training programs for their workers so that they could acquire and develop new skills.
However, these training programs usually yield better results, if an organization has a knowledge-based pay system (Toh, Morgeson, & Campion 2008, p. 864). This system has to account for individual contribution of every worker so that he/she could be more willing to take part in training. This is how several HRM practices can reinforce each other.
The second point that scholars make is that HRM practices should reflect organizations context. Managers should take into account such factors as the size of the company, its structure, culture, product, and so forth (Verburg, Hartog, & Koopman 2007, p. 186).
This is why it is necessary to adapt HRM practices to this context and make them mutually consistent. There is another distinct peculiarity of HRM bundles. A manager, who adopts this approach, should not focus on a single activity.
Instead, it is necessary to think about them as a system of related components (Gooderham, Parry, & Ringdal 2008, p. 2043). These people should remember that the change in one practice can either increase or decrease the efficiency of other HR activities. So, this approach differs from conventional strategies of HR managers.
Overall, HR bundles have to touch upon such aspects of HR management as recruitment, performance appraisal, compensation, the development of employees’ skills, empowerment of workers, and so forth. These practices should not be viewed as some disjoint elements.
More likely, they are supposed to support each other. It is believed that in this way, an organization can yield better results. So, theoretical underpinnings of HR bundles can be accepted. However, business administrators should remember that the bundling of HRM practices can be effective provided that the company can understands the values, goals, and needs of workers.
HR bundles should be based on some tested assumptions about the behavior of workers. Provided that this set of policies is poorly designed, its effects can be devastating because a company can design a whole set of policies that disregard the behavior of employees. This is the main risk that human resource managers should consider.
At this point, it is necessary to discuss empirical studies that examine the impacts of using this approach.
The researchers, who examine the changes brought by HR bundles, focus on such outcomes as the retention of employees, financial performance, relationship with customers, or operational performance (Subramony 2009, p. 745).
The meta-analysis carried out by Manesh Subramony indicates that there is a positive relationship between the use of HR bundles and some of important business outcomes. For instance, one can mention motivation-enhancing bundles.
They include such practices as linking pay with performance, incentive plans, or improved healthcare benefits (Subramony 2009, p. 746). The companies, which used these bundles, were able to reduce employee turnover (Subramony 2009, p. 753).
Additionally, skill-enhancing bundles positively affected the performance of workers (Subramony 2009, p. 752). This is one of the examples showing that this strategy can lead to superior results.
The main distinction of such companies is that they try to align their policies and orient them toward a certain goal. The management of these organizations does not isolate different practices of HR managers.
One can also refer to the research conducted by Eleni Stavrou and Chris Brewster (2009) who examined the impact of different HRM bundles on such aspects of business performance as service quality, profitability, and productivity (p. 191).
These authors surveyed the CEOs of 3702 companies (Stavrou & Brewster 2009, p. 191). This study examines the role of different bundles that are related to training, performance appraisal, and compensation (Stavrou & Brewster 2009, p. 193).
The researchers argue that a combination of strategies can better increase the productivity and retention of workers. In particular, they refer to training, pay-for-performance compensation system, and profit-sharing initiatives (Stavrou & Brewster 2009, p. 193).
On the whole, this study suggests that the bundle approach proved to be more effective than separate practices of HR managers. The organizations surveyed by Eleni Stavrou and Chris Brewster do not try to isolate HRM initiatives.
More likely, they were viewed as a combination of mutually consistent policies. This is the main distinction of this approach.
The use of the bundle method can have a positive impact on employees’ attitude toward the company and their commitment to organizational goals. One can mention the research article written by Jill Perry-Smith and Terry Blum (2000) who discuss the influence of the so-called work-family bundles.
They can be defined as a set of policies that are designed to improve non-work lives of employees (Perry-Smith & Blum 2000, p. 1107). The findings of these authors suggest that workers feel more attached to those companies which try to reconcile organizational goals with personal needs of an employee (Perry-Smith & Blum 2000, p. 1114).
Normally, these bundles include such practices as flexible schedule programs, leave policies, or reemployment of workers (Perry-Smith & Blum 2000, p. 1110). The main goal of these policies is to demonstrate that a company values each employee and wants to retain him/her.
Nevertheless, the authors also point out that the positive influence of work-family bundles is much stronger in those firms in which a greater number of women are employed (Perry-Smith & Blum 2000, p.1112).
Thus, the positive effects of HR bundles depend upon the demographic characteristics of the labor force; in this case, one can speak about gender.
On the whole, these examples suggest that the use of bundles can greatly benefit an organization. In most cases, organizations can really produce superior results with by adopting this approach. However, there are some issues that business administrators should not disregard.
First of all, the researchers, who did these empirical studies, admit that it is often very difficult to measure the influence of HR bundles on performance.
For instance, Manesh Subramony acknowledges that the influence of environmental factors on performance can be very significant and the degree of their influence should also be examined (2009, p. 758).
In this regard, one can mention such external factors as the demand of the products or services, the level of unemployment in the country, or the competition faced by a company.
These external factors can affect turnover in an organization or its profitability more profoundly than HR bundles. Additionally, Jill Perry-Smith and Terry Blum point out that the influence of HR bundles can be more accurately assessed if researchers conduct longitudinal studies (2000, p. 1115).
It is necessary to examine the effects of HR bundles for a long time, because in this way one can better very the results of empirical studies. The problem is that longitudinal is not always possible. Thus, empirical evidence supporting the use of HR bundles should be more closely evaluated.
Yet, despite these limitations one can still argue that the practices of HR managers should be better coordinated. They should have some common goal.
This is why human resource bundles are often related to many positive outcomes, such as increased commitment of workers, improved productivity, and stronger motivation of workers.
To a great extent, this argument is confirmed by many empirical studies. Although these studies have some limitation, the evidence that they provide suggests that the bundling of HRM practices is more effective that isolated activities of HR managers.
Although, the use of HR bundles can be very promising, researchers should carry out further studies in order to measure the efficiency of this method.
One should focus on such dimensions of performance as customer retention, turnover in an organization, revenues, and so forth. More importantly, the impacts of HR bundles should be measured for more than once.
References
Ahmad, S & Schroeder, R 2003. ‘The impact of human resource management practices on operational performance: recognizing country and industry differences’ Journal of Operations Management, vol. 21 no. 1, pp. 19-43.
Gooderham, P, Parry, E, & Ringdal, K 2008, ‘The impact of bundles of strategic human resource management practices on the performance of European firms’, International Journal Of Human Resource Management, vol. 19 no. 11, pp. 2041-2056.
Perry-Smith, J, & Blum, T 2000, ‘Work-family human resource bundles and perceived organizational performance’, Academy Of Management Journal, vol. 43 no. 6, pp. 1107-1117
Stavrou, E, & Brewster, C 2005, ‘The Configurational Approach to Linking Strategic Human Resource Management Bundles with Business Performance: Myth or Reality?’, Management Revue, vol. 16 no. 2, pp. 186-201.
Subramony, M 2009, ‘A meta-analytic investigation of the relationship between HRM bundles and firm performance’, Human Resource Management, vol. 48 no. 5, pp. 745-768
Toh, S, Morgeson, F, & Campion, M 2008, ‘Human resource configurations: Investigating fit with the organizational context’, Journal Of Applied Psychology, vol. 93 no. 4, pp. 864-882.
Verburg, R, Hartog, D, & Koopman, P 2007, ‘Configurations of human resource management practices: a model and test of internal fit’, International Journal Of Human Resource Management, vol. 18 no. 2, pp. 184-208.