According to Macduffie (1995), human resource bundles are a combination of human resource practices that are consistent and interconnected. The bundles are expected to create a greater impact on organizational performance. It has been suggested that a bundle of interrelating and consistent practices yield greater results in terms of performance than the individual practices yield (Perry-Smith and Blum, 2000).
Performance may be said to be dependent on the employee’s ability and the motivation to work. Therefore, human resource practices should aim at enhancing both. By bundling the practices, an organization can achieve greater performance (Dyer and Reeves 1994, p. 5). However, several studies have argued that different bundles affect performance differently. Some are thought to produce greater results.
This paper argues that the bundling of human resource practices may result in improved organizational performance, particularly when they are aligned with the organizational strategy and policies. First, this paper will highlight the effects of bundling in various contexts then provide evidence to show how the results are achieved when HR bundles are linked to the organization’s policies and strategies.
Bundling Of Human Resource Management Practices
Macduffie (1995) argued that maximum firm performance could be achieved when there were mechanisms that enabled individual employees to be assessed regularly. These ideas were similar to those proposed by Gooderham, Parry, and Ringdal (2008). Macduffie performed a study to investigate the effects of bundling of the human resource practices on the productivity and quality of assembly plants.
His argument was based particularly on the importance of human resource bundles on manufacturing performance. From his study, he was able to conclude that human resource bundles contributed to plant productivity and quality. However, he reiterated that these bundles could only be used to achieve greater performance if they were integrated with the manufacturing policies.
Macduffie explained that the bundling of human resource practices was more effective than the use of individual practices. The bundles would help shape the relationships between and among leaders and workers.
According to the author, the bundling of human resource practices is the only way to ensure that innovative human resource practices contributed to the improved economic performance of the organization. Bundling of the practices would enable employees to achieve exemplary knowledge and skills.
Consequently, it would ensure that the employees are motivated enough to use the given skills and knowledge for the good of the organization. However, it would be useless to have highly skilled and motivated employees and not be able to channel that potential towards the improvement of performance.
It is argued that overlapping and interrelated human resource practices should be bundled together to ensure that employees acquire skills in various ways. Examples of such bundles include on-the-job training, job rotations, and problem-solving groups. Several incentives could then be used to ensure motivation. Examples could include both extrinsic and intrinsic rewards. Extrinsic rewards may include monetary rewards.
Intrinsic rewards may be in the form of allowing the employees to participate in decision-making or ensuring that there is good job design. In the production industry, bundling of manufacturing practices and human resource practices could lead to increased performance.
In his study, Macduffie explored the differences between the industries that employed the traditional mass production systems and those that bundled human resource practices (flexible production). He was able to conclude that those that used bundles of human resource practices were able to outperform their counterparts in both quality and productive capacity.
From the results, it is evident that there is a relationship between innovative human resource activities and organizational performance. Shah and Ward (2003) also investigated the effects of bundles of lean manufacturing practices on operational performance.
Their results indicated that the bundles had a significant effect on the operating performance of the plants. Each bundle contributed towards the bettering of the manufacturing performance. However, they noted that factors such as plant size and plant age negatively influenced performance even when lean bundles were applied.
Gooderham, Parry, and Ringdal (2008) addressed the impact of human resource bundles on firm performance. They assessed 15 bundles, which were classified into three groups. These groups included the calculative, intermediary, and collaborative bundles. The calculative model mainly emphasizes that greater performance can be achieved when there are mechanisms to assess individual workers.
In particular, monitored use of training and performance rewards is important. Examples include training and monitoring, group-bonus, performance-related pay, profit sharing, share options, and evaluation of the human resource department. The collaborative approach, on the other hand, emphasizes that employees must be recognized as important stakeholders in the company.
Therefore, the employee is placed at the center of the organization’s interests. It is argued that without this being put in place, the employees would not be motivated and this would only result in distrust and resentment.
Consequently, this would lead to a lack of willingness to take responsibility for the company’s performance. Examples of such bundles include employee involvement, communication to management, communication of finance, communication of strategy, and communication on the organization of work. The intermediary category consists of bundles that may not be readily categorized into either of the two groups above.
Such bundles include career development, downsizing methods, and having wider jobs. From the study, the authors concluded that most of the calculative and intermediary human resource management bundles influenced the firms’ performance. However, collaborative bundles did not. The authors also argued that it was possible that human resource management bundles needed to be aligned with the organization’s strategic goals.
It was also suggested that these practices had to complement each other for the organization to achieve positive outcomes. The authors also suggested that other mediators might significantly influence the relationship between human resource practices and organizational performance.
Therefore, they suggested that human resource personnel were required to have a good understanding of the company’s strategic process to provide more strategically integrated directions. The study done by Stavrou and Brewster (2005) was similar to that of Gooderham, Parry, and Ringdal. They identified 15 human resource management bundles.
Of these bundles, six of them positively influenced organizational performance. However, one of the bundles negatively influenced performance. For example, training positively influenced performance. However, this study disagreed with some of the findings by Gooderham, Parry, and Ringdal.
Particularly, it suggested that communication on finance and communication on the organization had positive effects on organizational performance.
They argued that sharing information on important issues in the organization helped to ensure trust. For this reason, the employees could feel that they had been entrusted with great responsibility and that they were significant. Therefore, they would feel the need to put in great efforts to improve the performance of the organization.
Research has shown that human resource bundles have effects on the performance of organizations (Ahmad and Schroeder, 2003). However, there is evidence to suggest that the bundles should be aligned with the organization’s policies to ensure maximum output. Many organizations strive to develop highly skilled employees with conceptual knowledge but do little to motivate them to contribute both mentally and physically.
There is no point in having highly skilled individuals who are not willing to put the organization’s interest at heart. Research indicates that employees would be able to use their efforts towards problem-solving initiatives if their interests were aligned with those of their organizations. Their motivation comes with the knowledge that the organization would also reciprocate by investing in them.
Therefore, an ideal situation is whereby the human resource policies ensure job security and ensure compensation of the employees based on performance. The policies should also aim at reducing the status barriers between the employees and managers.
Dyer and Reeves (1994, p. 14) also appreciate the fact that maximum output in terms of performance is achieved when the human resource practices are linked with the organization’s strategies and other elements of organizational contexts. However, he argued that little research had been done to ascertain the position.
Human resource practices are meant to improve the performance of the organization (Delaney and Huselid, 1996). Bundling of human resource practices is a concept that has been employed in virtually every type of organization and business. This has ensured that the practices contribute to the enhancement of the employees’ ability to perform and their motivation to work to enhance performance.
Therefore, the organization put in place measures to ensure that the employees acquire the required skills (Lepak, Liao, Chung, and Harden, 2006). This may be done through off-the-job training, careful selection, on-the-job training, and various other ways.
Motivation, on the other hand, is enhanced through monetary or nonmonetary rewards. For the bundles to work efficiently, it is necessary to align them with the organization strategy. This would ensure that the employees are motivated enough to be responsible for the organization’s performance.
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