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Human resources and understanding employees’ interpretations of its function

Via South China Morning Post : Almost every day organisations worldwide come up with a new policy to hire, fire, promote, or pay their employees. If you think about your organisation, be it in Kowloon or Shenzhen, it is almost certainly the case.

But if you stop and think – have you ever asked why your manager has implemented such a new human resource (HR) practice? Did you interpret the implementation as thinking “they care and are concerned about your well-being”, or did you see it as a strategy to reduce costs?

For more than three decades researchers have tried to understand the relationship between Human Resource Management (HRM) and employee performance, like commitment, engagement, and innovative behaviour, and the firm’s performance, like return on investment, profit, and turnover.

The big question is, whether firms can enhance their performance by investing more money into training for employees, greater options to balance work and non-work activities, increased pay for performance, or foremost in the minds of many employees – a better performance appraisal system.

In the last 10 years, research has moved in other directions and researchers have tried to define the relationship between HRM and performance by focusing on employees’ perception, understanding and interpretation of HRM in their organisation. Only when employees perceive that their organisation even has a HRM system, can they can understand what is expected from them and why management has designed and implemented a HR practice in a positive way.

They then become much more committed to the organisation, show positive work attitudes and perform better.

Perhaps most pertinent for managers seeking to get the best from their staff is to dig deeper into the interpretation part. Researchers from Cornell University in the United States found that employees use five ways to explain why management designed and implemented a new HR practice. These explanations are also known as “HR attributions”.

The first one is a so-called external attribution; management implements an HR practice in response to situational pressure, such as compliance with union requirements. The other four are internal attributions; they refer to implementation because of internal pressure. Two of these are based around a commitment-focused approach by the organisation. Employees define the new HR practice from an enhancing service quality (which assumes a strategic goal perspective underlying HR), or an enhancing employee well-being point of view (which assumes an employee-oriented philosophy perspective).

The last two attributions refer to a control-focused approach of the organisation. Either a new HR practice is implemented to reduce costs (a strategic goal), or to exploit employees (employee-oriented). This research shows that employees who define managements’ intentions from a commitment-focused approach are committed to and satisfied with the organisation.

Contrastingly employees who identify the HR practises as management’s interest in a control-focused approach are less committed and less satisfied.

New research at the UNSW Australia Business School shows the way employees explain management’s motivation for designing and implementing a particular HR practice differs between the US and China and as a consequence, the effects in terms of employee attitude and behaviour differ too.

Research in various organisations across different sectors in China shows that a Chinese employee’s perception of exploitation – “HR practice is implemented in order to get the most work out of an employee”– is not seen as management’s desire to control, but is perceived as management’s desire to help.

In China, therefore HR practise is interpreted in a more positive way.

In addition, union regulation and cost reduction are seen as more or less the same attribution. This means that while US research shows five attributions, research in China shows only two attributions. First, commitment-based (on service quality, employee well-being, and exploitation) leading to positive employee outcomes, and second, a control-based explanation (cost reduction and union regulations) leading to negative employee outcomes.

The important question is if we can identify who understands the manager’s intention in a positive (commitment-based) or a negative (control-based) way. One part of this answer is the HRM in the organisation. The more managers invest in an advanced HRM system, paying attention to the interest of their employees, by making clear what they expect from them and why, the more employees can interpret management’s intention in a positive way.

Additionally, and a really important message both for HR and managers, is that the more employees have what is called a “high power distance orientation” – meaning that they expect and accept the unequal distribution of power in institutions and organisations – the weaker the relationship between the HRM system in the organisation and the way they explain management’s intentions in a positive way.

This means that management’s investment in HRM is only paying off for employees who are low in their power distance orientation. Although China is still high in power distance, the difference in this orientation within the country is becoming larger. Not everyone in China has a high power distance orientation any more, meaning more workers do not accept the unequal distribution within a company.

This makes it more attractive for organisations to invest in their HRM, in order to have more positive employee outcomes and as a result, higher firm performance. In this way more Chinese employees will answer the question on “why managers design and implement a new HR practice” in a positive way, which is good for the firm, and good for the employee.

Karin Sanders from the UNSW Business School researches the way employees perceive, understand and interpret human resource management in their organisation and investigate its effects on employee attitudes and behaviours.

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