High Performance Work Systems (HPWS)

HR Alignment

HR Alignment INTERNAL FIT

HR Alignment Strategy INTERNAL FIT

High-Performance Work System A specific combination of HR practices, work structures, and processes that maximizes employee knowledge, skill, commitment, and flexibility. Systems composed of many interrelated parts that complement one another to reach the goals of an organization, large or small.

Underlying Principles Shared Information Underlying Principles Egalitarianism Knowledge Development HPWS HPWS Performance-Reward Linkage HPWS HPWS

Underlying Principles Shared Information “Information” Underlying Principles Egalitarianism “Decision Power” Knowledge Development “Knowledge” HPWS HPWS Performance-Reward Linkage “Rewards” HPWS HPWS

Principles of HPWS Egalitarianism and Engagement Egalitarian work environments eliminate status and power differences and, in the process, increase collaboration and teamwork. When this happens, productivity can improve if people who once worked in isolation from (or opposition to) one another begin to work together.

Principles of HPWS (cont’d) Shared Information A shift away from the mentality of command and control toward one more focused on employee commitment. Creating a culture of information sharing where employees are more willing (and able) to work toward the goals for the organization.

Principles of HPWS (cont’d) Knowledge Development Employees in high-performance work systems need to learn in “real time,” on the job, using innovative new approaches to solve novel problems The number of jobs requiring little knowledge and skill is declining while the number of jobs requiring greater knowledge and skill is growing rapidly.

Principles of HPWS (cont’d) Performance-Reward Linkage It is important to align employee and organizational goals. When rewards are connected to performance, employees will naturally pursue outcomes that are mutually beneficial to themselves and the organization.

Employee Involvement Power Information Knowledge Rewards Authority to change job processes? Self-managed teams Information Is business information shared? Does the job involve performance feedback? Knowledge Does the employee have proper training for the job? Rewards Are rewards contingent on individual performance?

Employee Involvement Locating work decisions at the lowest level possible. Power Information Rewards Knowledge and skills EI in the Fortune 1000 150 Companies 1999 Survey Low EI Med EI High EI ROA 9.3 9.7 11.2 ROI 14.2 15.7 17.1 ROE 23.4 20.7 26.6 Market Return -.7 2.8 11.9 Market/ Book .7 1.3 1.8 Lawler, Mohrman & Benson, 2000

Ensuring Fit Internal fit External fit The situation in which all the internal elements of the work system complement and reinforce one another. External fit The situation in which the work system supports the organization’s goals and strategies.

Complementary Practices Staffing Training and Development Compensation

Transition to HPWS Necessary Actions for a Successful HPWS: Make a compelling case for change linked to the company’s business strategy. Make certain that change is owned by senior and line managers. Allocate sufficient resources and support for the change effort. Ensure early and broad communication.

Implementing High-Performance Work Systems

Navigating the Transition to High-Performance Work Systems Build a Transition Structure Implement High-performance Work Incorporate the HR Function as a Valuable Partner

Assessing Strategic Alignment: Fitting It All Together The HR Scorecard Assessing Internal fit Do all internal elements of the HR system complement and reinforce one another? Assessing HR Practices Do HR practices significantly enable key workforce deliverables such as employment stability and teamwork? Assessing External Fit Are workforce deliverables connected with key strategic performance drivers?

Evaluating the Success of the System Process audit Determining whether a high-performance work system has been implemented as designed: Are employees actually working together, or is the term “team” just a label? Are employees getting the information they need to make empowered decisions? Are training programs developing the knowledge and skills employees need? Are employees being rewarded for good performance and useful suggestions? Are employees treated fairly so that power differences are minimal?

Evaluating the Success of the System (cont’d) To determine if a HPWS program is reaching its goals: Are desired behaviors being exhibited on the job? Are quality, productivity, flexibility, and customer service objectives being met? Are quality-of-life goals being achieved for employees? Is the organization more competitive than in the past?

Benefits of HPWS Employee Benefits Organizational Benefits Have more involvement in the organization. Experience growth and satisfaction, and become more valuable as contributors. Organizational Benefits High productivity Quality Flexibility Customer satisfaction

Outcomes of High-Performance Work Systems Employee Outcomes and Quality of Work Life More involved in work More satisfied and find that needs for growth are more fully met More informed and empowered, feel that they have a fuller role to play in the organization and that their opinions and expertise are valued more Have a greater commitment that comes from higher skills and greater potential for contribution

Outcomes of High-Performance Work Systems (cont’d) Organizational Outcomes and Competitive Advantages Higher productivity Lower costs Better responsiveness to customers Greater flexibility Higher profitability