PEOPLE MANAGEMENT

A Critical Discussion Of The Linkage Between Effective People Management And Organisational Performance



A Critical Discussion Of The Linkage Between Effective People Management And Organisational Performance

Introduction

A rapidly changing economic environment, characterized by such phenomena as the globalization and deregulation of markets, changing customer and investor demands, and ever-increasing product-market competition, has become the norm for most organizations. To compete, they must continually improve their performance by reducing costs, innovating products and processes, and improving quality, productivity, and speed to market. With this Special Research Forum on People Management and Organizational Performance, we hope to contribute to a better understanding of the role of human resource decisions in creating and sustaining organizational performance and competitive advantage.

The conceptual and empirical work relevant to this question has progressed far enough to suggest that the role of human resources can be crucial (Arthur, 1994; Cutcher-Gershenfeld, 1991; Huselid, 1995; Huselid & Becker, 1996; Gerhart & Milkovich, 1990; Ichniowski, Shaw, & Prennushi, 1994; MacDuffie, 1995). However, given the importance and complexities of the issue, this body of work is relatively small, and most of the key questions are sorely in need of further attention. We hope that the publication of this special forum will encourage and reinforce interest in this area, as well as help researchers in their decisions regarding what to study and how to study it. We also hope that it will demonstrate to senior human resources (PM) and line managers that their PM systems represent a largely untapped opportunity to improve firm performance.

Discussion

In the recent past, many organizations have started looking critically at their management styles and changing old systems to adapt to new ones. People management is one of the areas that many companies are changing in order to improve their competitiveness in the market (Armstrong and Baron 2005: 49). Rees and McBain (2004:3-4) stressed on the importance of effective people management in organizations, and how this might positively link with the overall performance of the organization as well. The reason behind this assumption as they explained is that people in organizations exhibit a major role at the stages of planning and designing all aspects related to human resource management. Because as they mentioned, people are a valuable resource, that could help towards effectively linking human resource strategy with the organizations strategy which might result in an improved organizational performance. Similarly, Purcell et al (2009) acknowledged that previous research has positively confirmed the link between people management and organizational performance; however, they state that it is still undecided why and how this linkage is formed. Performance management as defined by Armstrong and Baron (2005:2) is the process of efficiently managing employees in the direction of achieving high levels of overall organizational performance, this process includes aspects such as goal setting, monitoring performance and developing skills. To further explore how people management and organizational performance relate together, this report aims to critically discuss the link between effective people management and organizational performance using the organizational context of Southwest Airlines, ...