Truss 2001

Journat of Management Studies 38:8 December 20010022-2380

COMPLEXITIES AND CONTROVERSIES IN LINKINC HRM WITHORGANIZATIONAL OUTCOMES*

CATHERI^fE TRUSS

Kingston Business School, Kingston University

ABSTRACT

Our understanding of the way in which human resource management (HRM) islinked to organizational performance is still limited, despite recent advances thatuse a quantitative approach to argue for a strong positive relationship between'High Performance Work Practices' and firm financial performance. These studiesare limited by their reliance on a single informant in each organization, and theiremphasis on financial performance at the expense of a broader range of outcomevariables. This paper contributes to the debate by analysing in detail the humanresource policies and practices of one case-study organization over a two-year timeperiod, using a variety of methodologies and drawing on a broad range of infor-mants across the organization. Instead of devising a list of 'best practice' HRMfrom the literature and testing its impact on performance, we instead invert thequestion and take a firm that is financially successful and ask what HR policiesand practices it uses. We also examine the way in which these policies are enacted.This methodology enables us to show that even successful organizations do notalways implement 'best practice' HRM, and that there is frequently a discrepancybetween intention and practice. Outcomes at the individual and organizationallevels are complex and often contradictory; we question the extent to which is itpossible or meaningful to attempt to measure the interrelationship between HRM,at the level of the formal system, and organizational performance, without takinginto consideration the role played by the informal organization in the process andimplementation of HR policies.

INTRODUCTION

The question of how human resource management (HRM) policies and practicesare linked to organizational performance has been a subject of great interest toboth academics and practitioners (Wright et al., 1999). Although much has beenmade of recent contributions, especially in the American literature, which set outto demonstrate the positive impact of some 'High Performance Work Practices'on the financial performance of the firm, there is still a great deal of uncertaintyaround the precise nature of these linkages (Mueller, 1996). Ulrich (1997, p. 304)Address for reprints: Catherine Truss, Kingston Business School, Kingston University, Kingston Hill,Kingston-upon-Thames, Surrey KT2 7LB, UK.

Blackwell Publishers Ltd 2001. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 lJF, tJKand 350 Main Street, Maiden, MA 02148, USA.

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summarizes the situation as follows: 'HR practices seem to matter; logic says it isso; survey findings confirm it. Direct relationships between investment and atten-tion to HR practices are often fuzzy, however, and vary according to the popula-tion sampled and the measures used'.

This paper sets out to make a contribution in three key areas of this debate.Firsdy, through a review of the literature, we separate out the various componentsof the HRM-performance linkage: how performance is measured; how HRM isevaluated; and how the link between the two is conceived and operationalized.This review highlights a number of ambiguities within the relationship.

Secondly, through adopting a longitudinal, case-study methodology we areable to contribute to existing empirical and theoretical understandings of theHRM-performance linkage through the lens of a more holistic and contextual-ized view of the HR process. Instead of taking the usual route adopted in this lit-erature of devising a list of 'best practice' HRM from the literature and testing itsimpact on firm performance, we invert the question and take a firm that is finan-cially successful in conventional terms, and ask what human resource policiesand practices it uses to achieve this level of performance. We extend the morefinancially-based performance measures favoured in some US studies to includea broader range of outcomes at both the individual and the organizational levels,along the lines of the 'balanced scorecard' (Kaplan and Norton, 1992, 1993). Thisenables us to question, through our data, the extent to which it is feasible to achieve'excellence' in all outcome areas.

Thirdly, and most crucially, we use the data and the analysis provided in thepaper to question the validity of adopting a universalistic list of 'high performance'or 'best practice' HRM policies. In the light of the significant role played by the'informal' organization, we argue that the success, or otherwise, of HRM policiesultimately depends on their organizational context, and on the way in which poli-cies are interpreted and enacted in practice.

HUMAN RESOURCE MANAGEMENT AND PERFORMANCE

Theories have been developed in three main areas concerning HRM and per-formance: the kinds of performance measures that are appropriate to studiesof human resource management; which HR processes and practices should bestudied and how they should be measured; and the nature of the linkages betweenthe two. We examine each of these in turn.

Performance MeasuresThe early literature on HRM tended to posit the notion that introducing HRMwithin an organization would lead to improvements in organizational efTective-ness, without specifying exacdy what these might be, although the implication fre-quendy was that this meant enhanced financial performance (Cook and Ferris,1986; Devanna et al., 1984; Tichy et al., 1982). Another strand within the litera-ture explicidy focused on improved financial performance as the ultimate measureof the effectiveness of HRM, but did not explain exacdy how this relationshipworked (Lengnick-Hall and Lengnick-Hall, 1990; Schuler and MacMillan, 1984).

One of the earliest attempts to measure performance in a broader sense wasBeer et al. (1984), who differentiated between short-term outcomes, including Blackwell Publishers Ltd 2001

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increased commitment and competence at the individual levels, cost-effectiveness(of the HR function) and congruence, and a range of longer-term outcomes,including individual well-being, organizational effectiveness and societal well-being(Truss and Gratton, 1994). Some commentators have been critical of this 'check-list' approach as being inappropriate to measuring HRM outcomes (Evans, 1986),although it does represent a move towards recognizing that HRM, potentially, hasa role at several levels, not just that of the firm. More recently, Cuest (1999) hasmade a strong case for considering the 'workers' views' when evaluating the successof HRM.

Attention has turned in the US to establishing a link between outcomes andso-called 'High Performance Work Pracdces' (HPWPs). Huselid, in his series ofpapers on this subject, uses quandtative techniques to demonstrate a link betweenHPWPs and a range of outcome variables, including, at the individual level,improved employee knowledge, skills and abilides, increased motivation, decreasedturnover and improved retention of quality employees, as well as sustained com-petitive advantage at the organizational level, although the ultimate focus of thisbody of work is on financial performance as the dependent variable (Delaney andHuselid, 1996; Huselid, 1995; Huselid et al., 1997).

Many scholars have highlighted the problems associated with seeking to estab-lish a reladonship between particular human resource practices and organizadonaloutcomes, for instance: determining which are the most appropriate criteria ofsuccess, accounting for any time-lag between formulation, implementation andeffect, and deciding on which perspective should be adopted (Guest, 1997;Hrebiniak et al., 1988). Generally speaking, it is recognized that adopting finan-cial measures as the sole criterion of success is too limited, and a broader per-spective should be considered that additionally takes account of success in termsof the customer and employee constituencies, along the lines of the balancedscorecard (Benkhoff, 1997; Guest, 1997; Hiltrop and Despres, 1994; Kaplan andNorton, 1992, 1993; Purcell, 1999; Ulrich, 1997; Yeung and Berman, 1997).

Measures of Human Resource PracticesThe literature to date is very unclear on the subject of how human resource prac-dces themselves should be measured and related to firm performance. Early writ-ings tended to focus on a limited range of generic human resource activities, suchas selection, training and development, appraisal and rewards, merely nodng thatthese should all be linked to the overall strategic objectives of the organization(termed 'verdcal integration'), rather than seeking to specify what could constitutebest practice in each area (e.g. Cook and Ferris, 1986).

More recently, empirical efforts have been based on the best pracdces per-spective and have focused on identifying bundles or configuradons of 'High Per-formance Work Pracdces' and sought to establish how these are related to firmperformance through the use of quandtative techniques; the so-called 'universal-ist' approach (Pfeffer, 1994; Purcell, 1999). However, views differ as to which prac-tices can be considered 'High Performance' (Guest, 1997). Becker et al. (1997)include rigorous recruitment and selection, performance-contingent compensationsystems, and management development and training activides linked to the needsof the business. Delaney et al. (1989), on the other hand, argue that ten HRMpractices in the areas of selecdon, appraisal, incentive compensadon, job design,grievance procedures, informadon sharing, attitude assessment and labour man-

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agement participation represent 'sophisticated' HRM. Huselid (1995) extendedthis list to include intensity of recruiting efforts, average number of hours train-ing per employee per year, and promotion criteria to represent the domain ofHPWPs. Delery and Doty (1996) in their review identified seven alternative 'strate-gic' HR practices found to be empirically or theoretically related in other studiesto overall organizational performance. Of these, their research found support forthe effectiveness of just three aspects: results-oriented appraisals, profit sharing,and employment security.

Becker and Gerhart (1996, p. 784), in their review of the literature on HPWPsconclude: 'studies of so-called high performance work systems vary significantly asto the practices included and sometimes even as to whether a practice is likely to bepositively or negatively related to high performance'. For instance, Arthur (1994)included a low emphasis on variable pay, whereas Huselid (1995) and MacDuffie(1995) place a strong emphasis on variable pay (Becker and Gerhart, 1996).

Whilst the HPWPs approach has clearly given us a greater insight into someof the mechanisms by which organizations can generate improved performancethrough their human resources, there are a number of weaknesses which need tobe addressed. Firstly, the reliance on quantitative techniques means that highlycomplex interventions are reduced to one single dimension in order that theymight be subjected to statistical manipulation; one example from Huselid's (1995)study is training, which is measured by the number of days training per employee.Adopting this somewhat crude measure means that other highly significant factorssuch as the content and quality of that training are ovedooked, as are other meanspotentially used by an organization to develop its human resources, such as men-toring, coaching and development. From a methodological perspective, Purcell(1999) argues that the use of large-scale data sets that rely on a single respondentcompleting a 'tick-box' questionnaire is not the most appropriate way of measur-ing the complex interrelationship between HRM and performance. He makes thefurther point that using such methods means that we are not able to capture impor-tant issues of process; nor, indeed, are we able to collect any data on the possibledichotomy between policy and implementation.

Similarly, adopting the universalist approach involves discounting the roleplayed by the organizational context within which the practices are enacted(Purcell, 1999). Gonsequently, the possible variation in the relationship betweenpractices and performance in different contexts is overlooked (this issue is debatedfurther in the following section).

Some recent research from the UK has also shown that it is not only compa-nies that adopt 'bundles' of High Performance Work Practices that perform well.One study by Wood and de Menezes (1998) discovered that the control or 'costminimization' approach to HRM could generate equally good firm performance.

Theories of Linkage between HRM and PerformanceEarly attempts to link human resource management with organizational perfor-mance relied on the common-sense belief that improving the way people weremanaged inevitably led to enhanced firm performance (Ulrich, 1997), withoutseeking to justify this linkage in theoretical terms.

However, sufficient work has now been carried out for Ulrich (1997, p. 306) toconclude: 'evidence now exists to show that investment in HR practices impactsbusiness results, both financial results and the market value of firms.' Blackwcli Publishers Lid 2001

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In tbe wake of tbese researcb projects, it was argued in one review that thesubject was no longer atheoretical, and that a variety of different theories, includ-ing general systems theory, role behaviour theory, institutional theory, resourcedependence theory, human capital theory, transaction cost economics, agencytheory and the resource based theory of the firm had been used to explain theHRM-performance linkage (Jackson and Schuler, 1995). The most commonlyused of these are outlined below.

According to human capital theory, people possess knowledge, skills and abilities(KSAs) that are of economic value to the firm and, therefore, firm investments toincrease these, for example, through training programmes, are only justified if theyproduce future returns to the firm in the form of increased productivity. There-fore, the higher the potential for employees to contribute to the firm, the morelikely it is that the firm will invest in human resource management activities specifi-cally aimed at increasing individual productivity and overall firm performance(Youndt et al., 1996).

An alternative view is the resource-based theory of the firm, which is based on thenotion that a firm's HRM system can constitute on source of competitive advan-tage (Barney, 1991; Becker et al., 1997; Lado and WUson, 1994; Pfeffer, 1994;Wright et al., 1995). A resource can be considered to be a source of sustained com-petitive advantage if it meets the criteria of non-substitutability, inimitability, rarityand value (Wright et al., 1994). Whilst some commentators argue that the practicesused to manage human resources are a potential source of sustained competitiveadvantage (Becker and Gerhart, 1996; Schuler and MacMillan, 1984; Ulrich,1991), others argue that it is the human resources themselves that meet the fourresource criteria (Wright et al., 1994, pp. 318-19): 'it is through the human capitalpool and employee behaviour that human resources can constitute a sustainedcompetitive advantage.' HR practices, they argue, are possible to imitate acrossorganizations, although their effect may vary across contexts.

The essential argument is that individuals' cognitive ability allows them to devisethe most effective strategy for performing required tasks, thereby increasing pro-ductivity Therefore, in a static environment, a firm with greater human capitalresources in terms of cognitive ability should have a productive advantage relativeto other firms (Wright et al., 1994). In more dynamic and complex environments,they argue that the human capital pool can improve firm performance through itsfiexibility The important role played by HRM practices in improving firm per-formance is through attracting, identifying and retaining high quality employees,and then getting them to behave in a way that supports the organization: 'thus,HR practices moderate the relationship between the human capital pool and firmeffectiveness, such that the pool is effective only when combined with the rightpractices that capitalize on the advantage through eliciting employee behaviour'(p. 320). .

Becker and Gerhart (1996) present the opposite view. According to them, itis not the human resource pool that is a source of competitive advantage, but thehuman resource system; individual policies or practices have little value in them-selves, but in combination can create a synergistic effect (Barney, 1995).

Mueller (1996, p. 776) proposes an 'evolutionary resource-based approach',arguing that strategic HRM can lead to competitive advantage only if effectiveresource mobility barriers exist - what is especially valuable in a firm is its infor-mal social architecture, including tacit knowledge, co-operation, informal learn-

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ing, that emerge over a long period of time and are largely unplanned. The roleof HRM therefore becomes that of harnessing the skills and competencies heldwithin the informal system.

One potential problem with the resource based view of the firm is its empha-sis on the importance of synergy and fit between the various elements of the HRsystem. As Becker and Gerhart (1996, p. 789) argue: 'one of the elements of ahigh performance HR system, under changing circumstances, must be flexibility'(see also Matusik and Hill, 1998). This raises the question of how compatible thesystems approach of the resource-based view is with flexibility. However, someinterpretations of the resource-based perspective do also allow for the integrationof the notions of fit and flexibility Wright and Snell (1998, p. 758), for example,introduce the idea of 'sustainable fit', where HR practices are linked to the flex-ible organization. 'Fit' itself is viewed as a snapshot in time with regard to howfirms achieve internal fit and environmental fit; flexibility, on the other hand, isconceptualized as an organizational characteristic and the two can, therefore,co-exist.

These arguments present a strong theoretical basis for the linkage betweenHRM and performance, but are still founded on the assumption that simply havingthe appropriate HRM policies inevitably means that they will be effectively imple-mented and will produce the intended results in terms of individual behaviourand, at one remove, firm performance.

Another approach that has been widely adopted is the contingency framework.According to this, the impact of HRM on firm performance is mediated by theorganization's business strategy (Youndt et al., 1996). Within this perspective, thebehavioural view argues that there is a unique set of employee attitudes and rolebehaviours required for the successful implementation of the organization's strate-gic objectives. The role of HR activities is, therefore, to elicit and reinforce thekinds of behaviours required by the firm (Jackson et al., 1989; Schuler andMacMillan, 1994). Becker and Gerhart (1996) argue that this approach is limitedbecause all it permits us to state is that for a given corporate strategy, the HRsystem has a universal or constant effect on organizational performance. We canonly assert whether a particular dimension is 'high' or 'low'. It also implicidy advo-cates the development of a tighdy-coupled system which may not be consistentwith the potential need for an HR system to be flexible.

Another addition to the debate is the configurational perspective. According to thisview, HR practices should be 'bundled' to be most effective (Delery and Doty,1996). Thus, the effectiveness of any HR practice depends on its interrelationshipwith others; they do not stand on their own. Wright et al. (1999) suggest that par-ticipative management is a key ingredient in the bundle. However, the view thatit is possible to devise a universalistic 'bundle' of best practice HRM is contestedthrough the debate on idiosyncratic contingency. Based on the dual notions of pathdependency, which suggests that strategy is an emergent concept for organizations,and causal ambiguity, which highlights the numerous and intertwining connectionsbetween factors that make each organization unique, the idiosyncratic contingencyargument suggests that the appropriate mix of HR policies can never be copiedfrom one context to another (Mueller, 1996; Purcell, 1999). Successful firms areeach successful in their own way, based on a unique mix of formal and informalfactors which is inimitable by other organizations.


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So far, the theories reviewed have focused on the relationship between HRMand outcomes at the level of the firm. Few have attempted to explain the inter-mediary linkage between HRM and individual outcomes, such as productivity.Guest (1997) has recendy sought to bridge this gap by arguing in favour of build-ing on theories of motivation, such as expectancy theory (Vroom, 1964) as a meansof providing a theoretical linkage between HRM and individual performance: 'itproposes that high performance, at the individual level, depends on high motiva-tion plus possession of the necessary skills and abilities and an appropriate roleand understanding of that role. It is a short step to specify the HRM practices thatencourage high skills and abilities. . .' (Guest, 1997, p. 268).

Delaney and Husclid (1996) and Huselid (1995) similarly argue that the role ofHRM practices is to tap into not only employees' knowledge, skills and abilities(KSAs), but also their motivation, in order that their behaviour is directed towardsorganizational goals. Thus, for instance, through using performance appraisals toassess individuals' performance and linking these with incentive pay and promo-tion systems focused on merit, organizations can theoretically improve their per-formance through lower employee turnover and greater productivity (Huselid,1995). These attempts to make the link between individual KSAs, HRM practicesand outcomes at the individual, group and organizational levels would appear topresent a step forward in theorizing about the linkages.

SummaryThe uncertainties within the literature that have been highlighted in this re-view provide a fruitful basis for further research. In particular, the debate aroundidiosyncratic contingency and issues around the inimitability of informal firmcharacteristics, challenge the assumption within the HPWS literature that a uni-versalistic set of HR practices suitable for all situations can be identified. Method-ological questions that have been raised, for instance, by Purcell (1999) and Guest(1999), suggest that seeking to collect data on the HRM-firm performance linkagethrough a questionnaire issued to a single respondent per organization is funda-mentally flawed, given that it does not allow for the investigation of qualitativeissues around process, practice and implementation. It is these issues which formthe basis of the empirical study described below.

METHODOLOGY

It has been argued that broader, more qualitative methods are needed to study thephenomenon of HRM, utilizing multiple sources that tap into the rationale behinddecisions that are made (Becker and Gerhart, 1996; Boxall, 1991; Gerhart, 1999;Guest, 1997). Some of the limitations of existing studies are that they have almostwithout exception used quantitative techniques, they have been cross-sectional,and they have relied on one informant in each organization (Ichniowski et al.,1996; Purcell, 1999). Becker and Gerhart (1996) point out that simultaneity biasmay occur if the same informant is asked for information about firm performanceand HR practice. / /

In this paper, we report on the findings of a longitudinal case-study in one firm,Hewlett-Packard. This firm was chosen for analysis specifically because it is a suc-

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cessful organization in terms of financial performance, and because of its recog-nized sophistication in the area of human resource management. Keenoy (1999,p. 5) describes Hewlett-Packard as an example of those companies that 'becameicons of the potential future promised by the discouse(s) of HRMism'. Laabs(1993, p. 48) comments of HP's HRM: 'HP has discovered a winning combina-tion'; the company was awarded the Personnel Journah award for General Excel-lence in HRM in 1993. It was hoped that by studying such an organization insome depth, it would be possible to advance both our empirical knowledge of HRpractices and our theoretical understanding of how HRM and performance arelinked. Through a case-based analysis, we were able not only to adopt a longitu-dinal approach and track change over time, but we were also able to consult mul-tiple informants and employ more in-depth, qualitative techniques than is possiblein a more quantitative study.

We adopted an exploratory approach towards collecting data; the recent trendhas been towards establishing a set of High Performance Work Practices from theliterature and seeking to prove their positive impact on firm performance. Wewanted to invert this question and ask instead: what HR policies does a success-ful firm have? How are these policies enacted and experienced by employees? Howare these interrelated with individual and organizational outcomes? This approachmeant that we were more open to the evidence of practice obtained from the or-ganization. We therefore adopted a generic approach to analysing the humanresource practices themselves, and collected data on a wide range of HRM areas,including recruitment and selection, training, development, career management,appraisal, and reward management at both time points and from the perspectivesof both policy, from the HR department, and experience, from staff, line andsenior managers, recognizing that experiences are likely to vary between levels ofstaff. As Guest (1999, p. 12) notes, HR practices 'may exist, but only have rele-vance to a minority of those working for the organization'.

Data were collected at two time points, January-March 1994 and May-^une1996. Four principal research methods were used: interviews, questionnaires, fbcusgroups, and the collection of documentary evidence. We collected data fromemployees at all levels of the firm, from 'operating core', middle managers, HRdepartment and senior executives, in order that we could access not only the'rhetoric' of what the HR group was trying to achieve, but also the 'reality' ex-perienced by employees (Legge, 1995; Truss et al., 1997). At both time points,the research was carried out within a key division of the firm's UK oflices.

In 1994, 400 questionnaires were distributed to randomly selected employees atmiddle manager level and below, representing around 20 per cent of the totalpopulation; 215 were completed, a response rate of 56 per cent. A two-hour focusgroup was held with senior members of the HR department, and 36 interviewswere carried out with senior managers, HR department members, line managersand non-managerial staff. In 1996, 400 questionnaires were issued and 209returned, a response rate of 52 per cent. A four-hour focus group was held withthe HR staff, and 20 interviews carried out within the organization. Appropriatesecondary data were collected at each phase.

In order to provide a point of comparison for the questionnaire data, we referto data collected from six other organizations at the same points in time and usingidentical methods. These six organizations were from different sectors: fast-movingconsumer goods, an NHS Trust, banking, financial services, pharmaceuticals and Blackwell Publishers Ltd 2001

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telecommunications, and were all members of the 'Leading Edge Research Con-sortium' (Gratton et al., 1999a, 1999b; Hope-HaUey et al., 1997; McGovern etal., 1997; Stiles et al., 1997; Truss, 1999; Truss et al., 1997). A total of 1549 ques-tionnaires were received and analysed from these six organizations in 1994 and1582 in 1996. The data are intended to provide an indicative point of compari-son with Hewlett-Packard (HP); it should be borne in mind that these six organi-zations were, themselves, top performers in their own sectors and therefore did notconstitute a random sample.

The findings are presented in five sections. In the first section we discuss thecompany background to the study. In the second section we focus on the rhetoricof HR policies and practices, and in the third section we examine individuals'experiences of HR policies. We then explore outcomes at the individual level, interms of morale, motivation, commitment and inspiration to perform, as well asstress and pressure, in the fourth section, and organizational performance in thefifth section. In adopting this structure, we are building on Guest's (1997) recom-mendation that intermediary outcome measures at the individual level need to beconsidered alongside broader, organizational and financial outputs.

The questionnaire data are presented in tables I, II and V. These tables showthe percentage of respondents agreeing with each statement in HP compared withthe other companies for both 1994 and 1996. In order to give some idea of thesignificance of difference between the responses, the mean and standard error sta-tistics are given for the range of responses, together with the t-statistic showing dif-ference of means. It should be noted that, because of the narrow range of possibleresponses to each question (from 1 = strongly agree to 5 = strongly disagree) andthe difference in size of the sample between HP and the other organizations, thet-statistic in this case may tend to overstate the significance of the difference.However, it still provides a good indication of whether responses in HP are sig-nificandy different from those of the other organizations. Tables III and IV showthe results of the analysis of firm performance of HP.

FINDINGS

BackgroundHewlett-Packard has grown dramatically from modest origins to become one of theworld's largest computer companies. At the time of the research, the companyemployed over 96,000 staff, around 20,000 in Europe. As a company, their tradi-tional focus has been on investing in research and manufacturing quality products,rather than attempting to compete on price, although falling margins within thecomputing industry have forced them to engage in relendess cost and price cutting.

Up until the late 1980s, Hewlett-Packard was a highly successful company. Atthat time, however, they began to face financial problems. The company's founderssaw the difficulties Hewlett-Packard was in and stepped in to effect a turn-around.A voluntary severance programme was put in place, and several thousand peopleleft the company, 500 in the UK. They set about decentralizing the structure andgiving individual business units back the freedom to run their own affairs, andcutting costs. This cost-cutting continued, and in 1996 there was an enforcedrecruitment freeze in some areas and some perks, such as foreign flights, werecut back.


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By February 1994, the company recorded a 41 per cent rise in first quarter netprofits, and was able to achieve 20 per cent growth per annum for the three yearsto 1996. 'We're a $40 billion company, the growth is almost unique. In fact, theVice-President Finance is on record as saying that there isn't much precedent forcompanies this big growing that fast, so we're breaking some observable phe-nomena' (Senior Manager, 1996).

There is no doubt that Hewlett-Packard operates in a highly competitive andrapidly changing business. One senior manager said, 'there is a thing calledMoore's Law, who said that the performance of computing equipment was goingto double at the same price every 18 months . . . so for the next 15 years the bulkof our business products are going to undergo dramatic change. Response to thischange will put tremendous stress on our group' (1996).

HR Policies and Practices: Organizational RhetoricWe cannot consider people management policy at Hewlett-Packard withoutpaying close attention to their visionary document. The HP Way, developed in1957 by a group of senior managers, and which articulates HP's 'business philos-ophy'. The three central tenets of people management which are enshrined in thedocument are:

(1) Belief in our people.Gonfidence in, and respect for, our people, as opposed to depending uponextensive rules, procedures, etc.Depend upon people to do their job right (individual freedom) withoutconstant directives.Opportunity for meaningful participation (job dignity).

(2) Emphasis on working together and sharing rewards, teamwork and partnership.Share responsibilities; help each other; learn from each other; chance tomake mistakes.Recognition based on contribution to results - sense of achievement andself-esteem.Profit-sharing, stock purchase plan, retirement programme, etc. aimed atemployees and company sharing in each other's successes.Gompany financial management emphasis on protecting employees' jobsecurity.

(3) A superior worVing environment which other companies seek and few achieve.Informality - open, honest communications, no artificial distinctions be-tween employees (first-name basis); management by walking around; andopen door communication policy.Develop and promote from within - lifetime training, education, careercounselling to help employees get maximum opportunity to grow anddevelop with the company.Decentralization - emphasis on keeping work groups as small as possible formaximum employee identification with our businesses and customers.Management by objectives (MBO) - provides a sound basis for measuringperformance by employees as well as managers and is objective, not political.

This has embodied HP's stated approach to managing people since it was firstdeveloped, and is the company equivalent of a HR strategy statement. However,



it is important to note that 'The HP Way' is not associated with the personnelfunction but, rather, is 'owned' by the whole organization: 'the HR function willnever be the owner of The HP Way, its guardian, its articulator, the real ownersare the managers' (Senior Manager, 1994). The fundamental principles behindThe HP Way are very much performance-driven whilst, at the same time, allow-ing for individual freedom in determining how those performance objectives areachieved (McGovern and Hope-Hailey, 1997): 'Hewlett-Packard's core values areabout, you can achieve anything if you unleash the potential of the individual andit's about making sure that the individual's potential is unleashed here' (SeniorManager, 1996). This is an important point to which we shall later return. Thecomment about 'protecting employees' job security' should also be noted, as thiswas misinterpreted by employees as meaning 'jobs for life', and is discussed furtherin the next section. We now look in some more detail at how this overarchingphilosophy is translated into policies by the HR function.

At the time of our study in 1994, recruitment and selection were not an explicit pri-ority for the company, since the headcount remained flat following the redundancyprogramme that had taken place. When recruitment did occur, the company madeextensive use of assessment centres and psychometric tests for applicants, whichsuggests a sophisticated approach (Huselid, 1995): 'the quality of the peoplecoming into the organization is a critical factor' (HR Dept, 1994). The company'sstated objective was to promote and develop from within, rather than recruiting atall levels.

Once individuals had been recruited into the organization, however, we foundthat most of the HR department's initiatives in both tranches of data collectionwere structured around particular company-wide programmes, or initiatives, thatspanned the traditional breakdown of HR activity into training, development,appraisal, career management, rewards, etc. typically adopted in the HR litera-ture. For instance, the 'Framework' initiative which was in place in 1994 focused onlinking individual objective-setting closely with the corporate ten-step planningprocess and the identification of the firm's 'Business Fundamentals' for the year,i.e., the key process measures. One Business Fundamental in 1994 was the timelycompletion of performance evaluations. The aim was that these Business Funda-mentals would be reflected in individual managers' own annual objectives throughthe mechanism of the 'Framework'. One member of the HR department said:'implementing the Framework means that an employee's principal duties areclearly deflned, with the Business Fundamentals against which the employee ismeasured'. This links in very strongly with the focus within The HP Way on Man-agement by Objectives (MBO). Outputs from the Framework process included jobprofiles, ranking criteria to rank individuals' performance against others, level dif-ferentiators, and training and development plans. Closely connected with this wasthe Total Quality Control process for reviewing and measuring quality. Part of theHP ethos was giving people clear objectives, but allowing them freedom in deter-mining how to reach these goals.

A third major initiative in place in 1994 was the Self-Development Scheme, aimedat encouraging ownership of careers and self-development amongst employees,with use of assessment centres, 'self-learning centres' and, at the senior level, 'life-long portfolio career planning'. We found that the aim was to link training anddevelopment into the needs of the business, and the 1994 study showed membersof the training department attended business meetings at least four times a year


1132 C. TRUSS

so that they could propose training solutions to particular business issues. Thisaccompanied the focus on lifelong, self-directed learning embodied in the Self-Development Scheme. Because of the focus on building talent rather than recruit-ing it, there was a strong emphasis on the importance of training: "We cannotreally increase the number of people we have so there is a great need for moreleaning' (Line Manager, 1994).

The rewards system was closely bound up with the performance evaluationsystem, the annual performance appraisal, and the ethos of The HP Way, whichexplicitly states that recognition will be based on contribution to results. Theappraisal system included both assessing how people performed against their indi-vidual objectives, and a ranking system which was used to determine performance-related pay Hewlett-Packard aimed to pay in the top quartile of its industry, butthe rewards structure was geared towards fostering long-term commitment to thecompany and sustained rewards over time, rather than paying extremely highbonuses: 'We want to bring in people who want a career, we pay good salaries, butif you want to earn a lot of money selling computers, you work somewhere else. . . we look for performance over time, that is the driving philosophy' (SeniorManager, 1994). There was, therefore, an emphasis on fringe benefits rather thanbonuses, with profit sharing, stock purchase plans, pensions, and a holiday cottagescheme. These were aimed at binding the employee to the company for the longterm, and were also available to all employees as part of the 'single status' culture(i.e. everyone had equal rights to fringe benefits), the only difference being wherethe company car cut in. Although there was this focus on binding people to thecompany, pay was still very much geared around individual performance, with theranking system used as the means of differentiating levels of performance: 'salaryscales reflect performance' (HR Staff, 1994).

The main differences we noted between 1994 and 1996 are outlined below. By1996, more recruitment was taking place (although some parts of the organizationwere experiencing a recruitment freeze) and so we found that HR staff talkedmuch more at interview about the importance of recruitment, especially withinthe context of 'building a pool of talent', bringing people in at the start of theircareer and developing the skills they needed: 'It's incredibly difficult to recruit goodpeople with the skills that we require. In fact, they probably don't exist externallyanyway, so even if you brought in good people by today's standards, you wouldstill need to be able to develop them to where you wanted them to be' (LineManager, 1996).

Development continued to be a priority area in 1996; for instance, we found thatthe HR function was attempting to plan ahead for skill development over thecoming two years through a series of brainstorming and workshop events withmanagers to find out their business priorities. One example to come out of thesesessions was a recognition of the change in skill profile needed for the sales forceas they moved from managing a territory with multiple customers to managing arelationship with one account customer. 'What we've done is we've tried to lookat managers about two years ahead and ask what sort of skills will individualsneed? . . . We've then tried to identify five key areas, what the deliverables shouldbe for that person in two years' time, what are the behaviours that person mightdemonstrate' (HR Staff, 1996). In line with the tenets of The HP Way, in 1996the company had introduced a scheme called 'Help Others Succeed' (HOS), aimed

Blackwcli Publishers Ltd 2001


at providing managers with the skills to coach and develop their staff through theircareers.

In terms of the structure of the training function, much had been outsourced,with the training department itself just providing basic management training inThe HP Way and induction training. There was also a new policy of charging fortraining as an internal consultancy which further helped to focus attention onpriority areas. The role of the training function had changed very much intothat of training and development 'broker', with training professionals workingalongside line managers to develop tailored programmes to be delivered by outsideagencies.

In the area of career management, between 1994 and 1996, a new initiative calledthe Flight Path Analysis had been introduced. Whereas, previously, the rankingsystem had just been used to determine pay, through the Flight Path Analysis, top('stars'), middle ('solid citizens'), and bottom performers ('passengers') and 'seed-corn' could be formally identified and this information could be linked intothe career management and training systems. Alongside this, a new scheme, theManagement Inventory, had also been brought in to track emerging talent within thebusiness units.

We also found that work had begun on developing new initiatives in the areasof flexibility and work-life balance, following the emphasis placed on theseissues by the CEO, Lew Platt (Truss, 1999). For instance, one of the HR staffexplained: 'We have Mr Motivator and Steve Cramm in here; everybody's hadtheir blood pressure checked and their cholesterol level checked, and we've gotthem all worrying about their health, because we think it's the single biggest thingwe can do'.

The flexibility issue was manifest, in part, through an increasing focus on theuse of flexible working contracts. Flexibility was not a topic on which we hadspecifically focused when designing our research instruments, but it emerged asimportant at HP in the second tranche of data collection. We found that the issuesof hot desking, outsourcing and subcontracting (up to 15 per cent in sales andmarketing), together with increasing numbers of employees working from homeemerged consistendy through the interviews with senior managers and HR staff.There was an increasing emphasis on encouraging people to work from home, andother forms of flexible employment: 'We're moving towards the core-peripherymodel, and another dimension is that we also have a lot more flexible labourthan a few years ago . . . we have a lot more part-time work and job sharing' (HRStaff, 1996).

This move was largely driven by business needs, for instance the need to provide24-hour cover for customers, extending the working day through shift-working.The move towards hot-desking was similarly driven by the need for front-line staffto be based with the customer or work from home so that they could provide amore immediate service. The implications of what this might mean for the com-pany were just being raised at the time of our research.

From the data reported here, it is interesting to note the grouping of HR activ-ities into segments based on outputs, rather than functions, as traditionally analysedwithin the HRM literature (i.e. recruitment, selection, training, etc.) Thus, fromthe firm's perspective, individual HR 'functions' are disaggregated and bundledtogether as a means of achieving a particular goal. In this way, 'training' or

Blackwcli Publishers Ltd 2001

1134 C. TRUSS

'appraisal' are not viewed as activities in their own right, but as contributorystrands within a number of different programmes and initiatives, where outputs,such as achieving individual and corporate objectives, are the main driver andorganizing factor. This does raise the question of whether academics, ourselvesincluded, are approaching the study of HRM in the most appropriate way

The Enactment of HR Policies: Employee ExperiencesIt is here that we start to go beyond the rhetorical level, which has been the focusof much of the 'best practices' literature, and ask: what is really going on in HP?The quantitative data relevant to this section are presented in table I.

Firsdy, we found evidence that the philosophical statement. The HP Way, wasembedded in the organization, and acted as a key driver for people's behaviour;reference to it was a regular feature of organizational discourse at both timeperiods. Typical comments were: 'you will never progress as a manager in thiscompany unless you practice management consistent with The HP Way' (SeniorManager, 1994); 'The HP Way . . . is the ethos' (Operating Core, 1994).

However, we found that the underlying values and beliefs expressed in The HPWay were open to differing interpretations (McGovern and Hope-Hailey, 1997).For instance, when we carried out the first tranche of data collection in 1994, wefound that the belief had been widely held among employees that The HP Waymeant jobs for life, even though this was not explicit, and so the round of redun-dancies that took place in the late 1980s had been perceived as a great shock, andwent some way towards undermining the psychological contract between firm andemployees (Gratton et al., 1999a; Laabs, 1993), as evidenced in some of the inter-views, for instance: 'During the downsizing, people thought The HP Way had gone. . . HP being Mr Big and Nasty' (HR, 1994).

Another theme that was just beginning to emerge as we collected data in 1996was the impact that the move towards fiexible working was having on The HPWay and on the nature of the employment contract. Glearly, this was an issue thatwas causing some concern to the HR department:

We don't socialize any more, communications are becoming very difficult, they[employees] don't get the feeling they belong to Hewlett-Packard, they eitherbelong to their customer or they belong to themselves, and I think there areloyalty issues around that. (HR Staff, 1996)

Purcell (1999) similarly noted that around three-quarters of HP's employees attheir Bristol manufacturing site were agency employees excluded from TheHP Way This notion of differing forms of relationships between individualsand organizations raises vital issues about the boundaries of human resourcemanagement and the limits of managerial control strategies. We return to thistheme later.

The strength of the value-set expressed in The HP Way was highlighted whenwe discussed recruitment at the interviews. Typical comments were; 'one of our prob-lems is that we're quite clone-like. We hire people in our own mould' (HR, 1994);'you can tell when they walk through the door whether they are an HP person'(HR, 1994). Thus, the ideology expressed within The HP Way is that of achiev-ing employee commitment through shared values; the downside of this is that indi-viduals with a different value-set cannot survive at the company, regardless of their Blackwell Publishers Ltd 2001

HRM AND ORGANIZATIONAL OUTCOMES

Table L Individual experiences of HRM, HP and other companies compared

1135

No.

1

2

3

4

5

6

7

8

9

10

Tear

19941996

19941996

19941996

19941996

19941996

19941996

19941996

19941996

19941996

19941996

19941996

Statement

My organizationrecruits the people itneeds to meet its goalsDays training thisyear: none

Days training thisyear: 10 or moreI receive the trainingI need to do my jobwellThe appraisal systemenables an accurateassessment of people'sstrengths andweaknessesMy pay is faircompared with othersdoing a similar job inother organizationsMy pay is faircompared with othersdoing a similar job inmy organizationThe rewards I receiveare not fair in relationto my contributionThe rewards I receiveare directly related tomy performance atwork'Satisfied' or 'verysatisfied' with careermanagementI do not have theopportunities I wantto be promoted

HP

%agree

74.871.6

13.721.910.813.945.845.5

44.940.4

41.830.0

41.645.1

27.926.1

40.543.5

29.134.8

33.231.4

Mean

2.2202.274

2.3632.2892.3632.2892.7012.770

2.8932.933

2.8363.084

2.9812.883

3.1813.251

2.9672.836

3.1272.965

2.9583.063

Standarderror

0.0560.065

0.0640.0740.0640.0740.0620.064

0.0710.068

0.0640.071

0.0760.082

0.0710.075

0.0700.069

0.0660.070

0.0710.075

Others

%agree

49.649.3

29.034.512.210.339.031.5

33.435.1

40.331.6

53.245.0

41.638.9

31.427.4

25.429.7

48.341.3

Mean

2.6922.746

2.1482.0492.1482.0492.9883.161

3.2353.145

2.9473.247

2.7562.963

2.8412.891

3.2283.286

3.3273.134

2.6732.789

Standarderror

0.0260.028

0.0280.0290.0280.0290.0270.027

0.0310.029

0.0310.032

0.0300.032

0.0280.030

0.0280.030

0.0290.027

0.0300.028

statistic\l t'Lv t vj vvv

7.646.62

3.083.003.083.004.245.61

4.412.85

5.612.11

2.750.91

4.454.46

3.465.98

2.772.23

3.703.43

jVbte: Scale: 1 = strongly agree, 5 = strongly disagree.

potential contribution. As Guest (1999, p. 6) notes: 'you either have to buy whole-heartedly into the culture or get out'.

Table I shows that, in the questionnaire survey in 1994, 75 per cent of respond-ents agreed with the statement, 'the organization recruits the people it needs tomeet its goals', compared with 72 per cent in 1996. These were far higher thanthe figures of 50 per cent in 1994 and 49 per cent in 1996 obtained from the six

Blaekwell Publishers Ltd 2001

1 136 C. TRUSS

comparator organizations, and suggest a very positive perception of the effective-ness of recruitment on the part of employees. This was summed up by one linemanager at interview in 1996: 'by and large, we've got pretty good people'. Thus,the outcome of the recruitment process, in terms of staff calibre, is perceived to bepositive. This may, in part, reflect the firm's tendency to recruit similar personal-ities, comfortable with each other's personal style. However, the actual process ofrecruitment was not viewed as effective at either time points by interviewees fromthe HR department: 'we have lost CVs in the past and interviewed people for thewrong job, not many, but it's embarrassing' (HR Staff, 1994).

With regard to individual training and development, item 2 in table I shows thatmore Hewlett-Packard employees had, in practice, received at least some trainingin the current year than the average for the other six companies, which fits withHuselid's (1995) criteria for High Performance Work Practices. This generallypositive view was reflected in several of the interviews: 'training is excellent bothfrom a technical and an interpersonal standpoint' (Operating Core, 1994); 'devel-opment is very good . . . you can go to Personnel and have your skills assessed andthey will suggest new ways of doing things' (Operating Core, 1994).

However, when we probed beneath the surfkce, we found a number of morenegative features of training at HP We noted earlier that a system of chargingbusiness units for training had been introduced between the two time periods.At interview, we learned that some managers were more prepared to allocatefunds for training than others. Consequently, managers were acting as a powerfulmediator between the individual and the training and development provisionof the company Some individuals were unable to attend courses and, at interview,commented on the perceived unfairness of this situation: 'the pressure is somuch on doing the day job, training is at the bottom of everybody's list; it isperceived as a nice-to-have, but is it really important?' (Operating Core, 1996);'development is the stumbling block that everyone runs into . . . like training, it getsleft behind because there are too many other things happening' (Line Manager,1994).

Table I also shows that the proportion of those receiving no training had risenfrom 14 per cent to 22 per cent over the two-year period, accompanied by a slightincrease in the number receiving more than ten days' training. Taken together withthe implications of the budgeting allocation discussed above, this perhaps suggeststhat training and development were increasingly being targeted at particulargroups of employees rather than the employee cohort as a whole. We return tothis theme later, when we discuss appraisal.

The questionnaire data in table I also show that, despite the focus on trainingand developing talent from within, fewer than half of Hewlett-Packard respond-ents felt they had had the training they needed to do their job well, although thiswas slightly more than the average for the other six companies (item 3 in table I).This illustrates the point that, even though a company might be carrying out alarge quantity of training, the quality of that training may not be appropriate forthe jobs people carry out. It is therefore insufficient to look simply at measuresof the quantity of training an organization carries out when assessing the qualityof training provision as has been done in some of the Best Practices studies(Huselid, 1995).

With regard to performance appraisal, we found that formal performance appraisaltook place annually for each employee but that, informally, people were continu- Blaekwell Publishers Ltd 2001


ously appraised. This is in line with Huselid's (1995) High Performance Work Prac-tices. Some typical interview quotes were: 'my experience of appraisal is formally,annually, continually' (Operating Core, 1996); 'nothing comes as a surprise at theformal performance evaluation' (Operating Core, 1994). This is in line with theethos of" The HP Way and the stated policy of Management by Objectives. Wealso found evidence in the interviews that performance evaluation was taken veryseriously by many managers in the company. As one manager said: 'Hewlett-Packard takes Performance Evaluations seriously, we are measured on it, it goeson your file and it follows you around' (Line Manager, 1994).

However, again, once we tapped beneath the surface and asked in the ques-tionnaire whether the appraisal process enabled the organization to accuratelyassess people's strengths and weaknesses, fewer than half of respondents agreedin either Hewlett-Packard or the other organizations. These figures were achieveddespite Hewlett-Packard's espoused focus on performance management and theimportance attached to the appraisal process, and suggest that simply finding outwhether an organization has an appraisal system is not an adequate means ofassessing the quality of appraisal. We found some clues as to the reason for this inthe interviews:

In theory, appraisal is very good; in practice, it is not. The rules of appraisal atHP are that they should, 1) not be pre-written; 2) not contain any surprises; 3)always end in agreement. These rules are not always followed. This happenedto me; my first appraisal was pre-written . . . I know of others who have dis-agreed with their appraisals and who asked for them to be amended, andnothing had been done. (Operating Core, 1994)

Ranking . . . has become a real political football in the company . . . I think it'sfailed because people haven't been clear about setting objectives and explain-ing measures. (HR StafT, 1994)

A number of themes emerge from these comments. Firsdy, the line manager playsa key role in enacting and interpreting appraisal policy; an individual's experienceof company policy is, inevitably, coloured by the way the manager carries out theappraisal. Secondly, the ranking system in use in the company appeared to be atodds with the emphasis in The HP Way on teamworking.

HP's stated policy was to relate rewards closely to performance. Their relativesuccess at this was reflected in the questionnaire data (table I, item 8), whichshows that far more Hewlett-Packard respondents believed the rewards theyreceived were directly related to their performance than in the other companies,although still fewer than half However, individual perceptions clearly were thatsalaries at HP were falling compared with other organizations, as the numbersagreeing that their pay was fair compared with that of people working in otherorganizations fell from 42 to 30 per cent over the two-year period. A similar fallwas noted in the other organizations. This was the subject of comment in manyinterviews:

If it's not remedied, it's going to be a huge problem. It will be a quality problem,because we'll end up with the people who can't go anywhere else because theycan't get jobs. (Senior Manager, 1996)


1138 C. TRUSS

As discussed earlier, part of the HP ethos was that the company would adhere toa single status, so that salaries and benefits were pegged to the same level acrossthe whole firm. In 1994, this was regarded as a positive benefit for the companybut, by 1996, was viewed by some as a millstone dragging pay levels down touncompetitive levels for areas such as computer sales:

We're not convinced we will continue to have just one sales range in the futurebecause there is some evidence that particularly in our CSO business, salespeople are being paid more, and we may need to create a separate range forthose people, but this has enormous political implications, which is why we'reholding out on that. (HR Staff, 1996)

The increasing levels of pressure on people brought about by the company's rapidgrowth with a static headcount, which is discussed further in the following section,was refiected in people's apparendy increasingly negative views on rewards thatwe noted between 1994 and 1996. One typical comment at interview was:

It [profit sharing] is motivational, but everybody knows the blood, sweat andtears that everybody is putting in these days. . . Yes, it's a motivation, but thenit had better be there because we are all bloody tired of running at 200 milesper hour. (Line Manager, 1996)

Following the delayering and downsizing initiatives in the late 1980s, career man-agement issues had come to the fore, with the introduction of self-managed careers,where the employee was expected to take responsibility for their own career pro-gression within the company We found in the interviews that perceptions of careermanagement and individuals' career prospects within HP were quite negative:

Self motivation is an HP word, but it is difficult to divert into another area evenif you are self-motivated. (Operating Core, 1994)

As table I, items 9 and 10 show, perceptions of career management within bothHP and the other companies were quite negative, with only around one-third ofrespondents satisfied with career management.

Traditionally, career management at Hewlett-Packard had been largely infor-mal with no formalized career planning system in place, and worked on the basisof people making themselves 'visible' through self-promotion:

People are expected to own and manage their own career but often haven'tthe power to do so. Promotions are through networking, meeting people inthe coffee area rather than during the interviews. Networking is part of theculture. It's who you know and how you network that will get you on in HP.(HR, 1994)

Despite the introduction of more formalized career management systems by 1996,it was still clear that the average perception was that informal channels continuedto predominate: 'Network is the primary rule. It's not just a matter of being com-petent and performing well but other people who could effect a move for you needto know that that is the case' (HR Staff, 1996). The difficulties associated with Blackwell Publishers Ltd 2001


operating within such an informal system in a large organization were explainedby one interviewee: 'about ten years ago, you knew everybody's name here. It wasmuch smaller. Now I don't know half the people here. Some jobs might be offered,and I won't know about it' (Operating Core, 1996). One senior manager explainedhow the development process typically worked:

It sort of works like this; every now and again, various groups around HP willmeet and various names will drop into an unwritten list. . . it's a consensus thing. . . it has enormous drawbacks, not least being in view of diversity efforts.(Senior Manager, 1996)

This informal approach may not be directly at odds with HP's espousal of self-managed careers, but it would appear to be at odds with HP's aspiration to be ameritocracy (how can you be sure the best person gets the job by relying on word-of-mouth in a large, fiat organization?) as well as conflicting with the emphasis ondiversity (networking notoriously favours some people in the working populationat the expense of others).

In summary, if we look at the quantitative and qualitative data on individuals'experiences of' HRM, a number of key themes emerge. Firsdy, we saw that, inmost cases, employees at HP felt significantly more positive about their employ-ment than those at other organizations. However, we also found through both thequestionnaires and the interviews that, even at HP, experiences were not uniformlypositive. We found substantial differences between the 'rhetoric' of what the HRfunction was seeking to achieve, and the 'reality' experienced by employees, forinstance, in the area of self-managed careers, appraisals and recruitment. Throughadopting a holistic, case-based methodology, we have been able to show thateven HP cannot get it right all the time. We have also been able to track changesover the two-year time span of the research, and found that change takesplace relatively slowly in the area of HRM (Cratton et al., 1999a, 1999b). In par-ticular, in the area of career management, we found that informal processes ofnetworking continued to override formal career management processes. This high-lights the role of the line manager as mediator between formal policy and indi-vidual experiences. In the next section, we move on to consider outcomes at theindividual level.

Outcomes at the Individual LevelIn this section, we look at the question of how employees actually felt aboutworking for Hewlett-Packard. The relevant quantitative data are presented in tableII. The essential questions here related to morale, intent to turnover and motiva-tion to perform.

We asked two questions about employee morale in the questionnaire survey in1996 (items 1 and 2). Over half of respondents in both Hewlett-Packard and theother companies stated that morale was 'worse' than two years ago, 52 per centand 63 per cent respectively Significandy more Hewlett-Packard respondents thanin the other organizations agreed that 'morale is high', 35 per cent compared with14 per cent, but this still represents around one-third of employees and, taken withthe earlier figures, suggests that overall levels of morale in Hewlett-Packard werequite low, although not as low as in the other organizations. These figures need tobe explored in relation to the findings presented below.


1140 C. TRUSS

Table II. Individual outcomes, HP and other companies compared

No.

1

2

3

4

5

6

7

8

9

rear

199419961994199619941996

19941996

19941996

19941996

19941996

19941996

19941996

Statement

Morale is worse than2 years agoMorale is high

This organizationreally inspires thebest in me by way ofjob performanceI am willing to put ina great deal of effortbeyond that normallyexpected in order tohelp this organizationbe successfulI want to stay withthis organization forthe rest of my careerHow likely is it thatyou will leave thisorganization foranother employer inthe next 2 years? (%likely or very likely)Pressure of work hasinereased in the past2 yearsWorking hours haveincreased in the past2 yearsThere is less jobsecurity nowcompared with 2years ago

HP

%agree

N/a52.343.334.553.051.4

91.690.8

N / a66.0

N / a11,3

N / a89.5

N / a66.1

N / a61.4

Mean

3.4362.8653.0462.6002.549

1.6561.705

2.175

3.912

1.696

2.111

3.632

Standarderror

0.0700.0640.0760.0670.073

0.0460.055

0.072

0.077

0.060

0.066

0.070

Others

%agree

N / a62.710.013.920.024.0

78.774.9

N / a41.0

N / a23.9

N / a80.9

N / a39.5

N / a64.8

Mean

3.6793.9263.6583.4063.200

1.9902.116

2.843

3.432

1.861

2.542

3.783

Standarderror

0.0260.0260.0270.0270.026

0.0260.024

0.033

0.035

0.026

0.022

0.025

t

statistic

3.2515.367.56

11.168.39

6.326.88

8.46

5.66

2.52

6.21

2.03

Nok: Scale: 1 = strongly agree, 5 = strongly disagree.

Two of the questions were direcdy related to motivation to perform and, for bothof them, Hewlett-Packard scored far more highly than the other organizations atboth time points (items 3 and 4). Almost all respondents in HP agreed that theywere willing to put in a great deal of effort to help their organization be success-ful, although only just over half felt HP inspired the best in them by way of jobperformance. This generally positive view of HP was confirmed by the data onintention to quit (items 5 and 6), where far more HP respondents wanted to staywith their company for the rest of their career than was the case at the other or- Blackwell Publishers Ltd 2001


ganizations. We therefore found some potentially conflicting messages from thequestionnaire data, where people were very highly motivated, but felt that levelsof morale were low. One possible explanation for this lay in the findings on thesubject of stress and pressure. As items 7 and 8 show, people's perceptions of bothpressure and stress had increased far more at HP over the two years to 1996 thanat the other organizations. Indeed, the topic of stress and the sheer amount ofwork people felt they had to do was a recurring theme at the interviews carriedout in 1996. One typical comment was: 'I think the issue we face is that we down-sized so dramatically that we got away with it for a few years, but now we're strug-gling. I do four jobs now' (Manager, 1996).

Partly in response to an awareness of these issues, the HR Department hadbegun to put in place various initiatives to combat levels of stress, as we saw earlier.However, some employees at interview expressed their scepticism about thecompany's actions and intentions: 'We work until 7.30pm at night, we work on aSunday, because there aren't enough people, you have a head-count freeze on. Weaccept all that. But don't keep teDing us you're making the work-life balance better'(Operating Core, 1996).

We therefore have a picture emerging of a company that inspires great loyaltyand motivation in its employees, but where levels of stress and pressure are rapidlyincreasing to what would appear to be an unacceptable level with associated poormorale.

Outcomes at the Organizational LevelIn this section, we look at organizational performance in terms of employees' per-ceptions of company effectiveness, and also at firm financial performance. Wemeasured this along two dimensions, return on assets and profit per employee,which is basically a measure of firm efficiency. These are both accounting meas-ures, which have generally been regarded as inferior to capital market measures(Huselid, 1995), but we were restricted by the fact that Hewlett-Packard is a wholly-owned subsidiary of a US company and is not quoted on the London StockExchange, so we could not calculate measures such as Tobin's q, which is consid-ered a good measure of firm financial performance (Hirschey and Wischern,1984). We measured both return on assets and profit per employee for the period1994-1997 and, additionally, took two points of comparison for each. Firstly, wecalculated the mean return on assets and profit per employee for eight key com-petitors in the same industry as Hewlett-Packard and, secondly, we did both cal-culations for a sample of ten randomly chosen companies from the London StockExchange FTSE 100 index.

As tables III and IV show, Hewlett-Packard outperformed both its competitorsand the ten FTSE 100 companies on both measures over the whole period. Theonly exception was profit per employee in year ending 1995, where results werethe same for both Hewlett-Packard and the FTSE 100 companies. The only dis-cernible trend picked up in the analysis was Hewlett-Packard's steadily increasingreturn on assets between 1995 and 1997.

With regard to perceptions of organizational effectiveness, we found that theviews of Hewlett-Packard employees were much more positive at both time pointsthan those of employees in the other companies. Items 4 and 5 in table V showthat a significantly larger percentage of HP employees believed their company wasbetter placed than its competitors to meet challenges, and that their organization


1142 C. TRUSS

Table III. Return on assets (%), 1994-1997

1994 1995 1996

HPRivalsFTSE 100

17.09.77.2

12.57.89.2

19.13.4

10.7

1997

22.65.6

11.6

Table IV Profit

HPRivalsFTSE 100

per employee

1994

20.418.210.6

('OOOs),

1995

13.39.8

13.4

1994-1997

1996

25.11.2

17.3

1997

21.25.8

19.3

Table V Organizational outcomes - HP and other companies compared

No.

1

2

3

4

5

6

7

8

Year

19941996

19941996

19941996

19941996

19941996

19941996

19941996

19941996

Statement

My boss is good athis/her jobWork is carried outefficientlyManagers take thelong-term viewMy organization isbetter placed than itscompetitors to meetthe challenges of the1990s

I believe myorganization willachieve its aimsMy organization isflexible enough tocope with change

I have confidence inmanagement's abilityto copy with anunforeseen crisisPeople are afraid oftaking risks

HP

%agree

59.564.257.949.435.332.091.280.5

87.887.9

80.079.1

62.065.9

47.442.8

Mean

1.4842.3762.5472.7303.0423.0931.7721.994

1.9341.908

2.1072.064

2.4742.439

2.7582.850

Standarderror

0.0700.0830.0550.0740.0690.0800.0450.062

0.0430.052

0.0570.066

0.0620.074

0.0680.078

Others

%agree

62.165.451.849.928.735.159.561.3

71.775.7

60.165.3

46.836.7

59.347.8

Mean

2.4592.3512.6962.7053.2192.9632.4022.343

2.2512.132

2.5202.355

2.8172.993

2.4462.654

Standarderror

0.0270.0270.0240.0250.0270.0270.0220.023

0.0200.020

0.0240.023

0.0260.028

0.0240.025

t

0.330.282.480.332.391.53

12.585.25

6.684.03

6.684.16

5.106.96

4.332.39

Note: Scale: 1 = strongly agree, 5 = strongly disagree.



would achieve its aims, than was true in the other organizations. Significantly moreHP employees also believed that their organization was flexible enough to copewith change than was the case in the other companies.

Respondents were also asked about their perceptions of management effective-ness (items 1, 2 and 3). The fact that perceptions at Hewlett-Packard were, on thewhole, somewhat more negative than, or similar to, the other organizations wassurprising. The low numbers agreeing in all organizations that managers take thelong-term view perhaps reflects the short-term pressures referred to earlier. Withregard to perceptions of people's knowledge, skills and abilities within the firm, itwas striking that fewer than half of employees in Hewlett-Packard, 49 per cent inthe 1996 survey, agreed that work was carried out efliciently, whilst fewer than two-thirds thought their boss was good at his/her job.'^ '^

DISCUSSION

In this discussion section, we focus on three main areas: the data and the empiri-cal aspects of the findings, the theoretical implications and, finally, the method-ological issues arising out of the study.

Firsfly, from the point of view of the data themselves, we found that, despiteHewlett-Packard's financial success and apparent application of 'High Perfor-mance Work Practices' in areas such as appraisals and training and development,the results obtained were not uniformly excellent; in fact, some were highly con-tradictory. For instance, despite an espousal of the value of training and develop-ment from within, fewer than half of employees believed they received the trainingthey needed to do their job well. Similarly, despite a strong management by objec-tives system, fewer than half felt that the appraisal system enabled an accurateassessment of strengths and weaknesses to take place. Although the companyaimed to pay in the upper quartile, fewer than one-third felt their pay was faircompared with others doing similar jobs in other organizations (although this maybe due to individuals' perceptions). Whilst the company espoused career man-agement through programmes such as the management inventory and flight pathanalysis, just one-third of questionnaire respondents were satisfied or very satis-fied with career management. These are all examples of a strong disconnectbetween the 'rhetoric' of human resource management as expressed by the humanresource department, and the 'reality' experienced by employees (Legge, 1995;Truss et al., 1997). The findings show that even a highly successful company witha strong track-record of 'excellence' in people management practices cannotachieve all-round success. Perhaps this is unavoidable, and lends some support tothe argument put forward by Keenoy (1999) that paradox and contradiction areinevitable features of HRM.

The second theme to arise out of the data was the conflicting evidence on out-comes at the individual and organizational levels. Whilst staff were very loyal,generally expressing low levels of intention to quit, this was coupled with feelingsof increasing stress and pressure of work and lowered morale over the time periodwe studied. This may, in part, be due to their realization that the situation was likelyto be similar in other organizations. Also, whilst the perception was that the Or-ganization as a whole was successful compared with its competitors and therewas faith in the ability of the organization to achieve its aims, only around half of


1144 C. TRUSS

respondents in 1996 agreed that work was carried out efficiently, and only one-third agreed that managers take the long-term view. Whilst more than tree-quarters of respondents felt the organization was flexible enough to cope withchange, fewer than one-third disagreed with the statement that 'people are afraidof taking risks'. Thus, pursuit of the notion that we should examine a broader rangeof outcomes than simply financial performance has led us to some seemingly para-doxical and incompatible conclusions. One possible interpretation of the discon-nect between perceptions of organizational and individual performance might bethat people had faith in the organization as a whole due to its sustained financialsuccess compared with its competitors, but that, on a day-to-day basis, were able tosee for themselves that work was not always done efficiently and that managers oper-ated on a more short-term basis. Again, this shows that even a successful companycannot be uniformly excellent in the way it is organized and managed.

From a theoretical perspective, the data have also served to shed some light onour understanding of the linkages between human resource management and per-formance. Firstly, the resource based view argues that having unique, inimitableresources and the effective deployment of these resources are key to achieving sus-tained competitive advantage (Barney, 1991, 1995). However, our data show thatthe influence of the external environment should not be discounted to the extentsuggested by the resource based view. This can be illustrated by the way Hewlett-Packard's environment was becoming increasingly competitive and hostile, leadingto the setting of ever more challenging targets, meaning that loyal and committedemployees felt obliged to work longer and longer hours under increasing pressureto reach them. At the same time, both the financial and personal rewards they hadbeen used to receiving at Hewlett-Packard, for example, stable employment, high-level pay and benefits, and an upward career trajectory, were being eroded due tocost-cutting measures, such as delayering. This shows the way in which events andconditions in the external environment can impact negatively on the deploymentof an organization's human resources.

Similarly, the resource based view suggests that synergy, or fit, within the HRMsystem will have a beneficial effect on financial performance. Our data have shownthat Hewlett-Packard did not manage to achieve fit across all areas of the HRMsystem, and yet still managed to achieve high levels of financial performance.

Our findings did lend strong support to the argument put forward by Mueller(1996) that the informal organization has a key role to play in the HRM process,such that informal practices and norms of behaviour interact with formal HRpolicies. This draws on ideas well established within organizational sociology con-cerning individual agency and group dynamics. These can act to either enable orconstrain the realization of formal organizational policy. What we found in HPwas that, although the formal policies turned strongly around the notion ofmeasuring and rewarding individuals' work performance against targets that wereclosely related to the company's objectives, informally what counted was visibilityand networking if people wanted to further their careers. Despite the increasedfocus at the policy level in 1996 on formalized career management, the traditional,informal method of career management that had evolved within the companycontinued to prevail. This highlights, firstly, the importance and strength of theinformal organization as mediator between policy and individual and, secondly,the slow speed of change within organizations and the length of time it takes fororganizational initiatives to become embedded (Gratton et al., 1999a, 1999b). Blackwell Publishers Ltd 2001


This nexus between formal and informal organization is something that cannotbe captured within the High Performance Work Systems literature, with its exclu-sive focus on formal policy As Purcell (1999, p. 36) notes: 'the claim that the bundleof best practice HRM is universally applicable leads us into a Utopian cul-de-sacand ignores the powerful and highly significant changes in work, employment andsociety'. Thus, any given policy, or bundle of policies, will be interpreted andenacted differently in different organizational contexts, in the light of their culture,structure and administrative heritage. To this important role of context we canfurther add the role of each individual manager as agent, choosing to focus his orher attention in varying ways.

Finally, we turn to the methodological implications of the study Firstly, we haveseen the value of carrying out an analysis using multiple methods and multiplerespondents. Had we merely relied on questionnaire data obtained from a singleinformant (the HR director, as in other studies) and carried out a quantitativeanalysis linking performance with human resource processes, we would have con-cluded that this organization was an example of an organization employing 'HighPerformance Work Practices' to good effect. However, employing a contextualized,case-study method has enabled us to see below the surface and tap into the realityexperienced by employees, which often contrasts sharply with the companyrhetoric. We are not seeking to assert that Hewlett-Packard is not successful;indeed, our data show that it is very successful along many dimensions; what weare suggesting, however, is firsdy that there is a gap between company rhetoric andemployee perceptions and, secondly, that it is possible for confiicting results to beobtained that merit further investigation and which would not emerge throughconventional, quantitative analysis from a single respondent.

The fact that the study was longitudinal has also enabled us to start the processof tracking change over time. In some cases, very little change was found to havetaken place and, in others, the change was quite considerable. For instance, therewas a marked move towards the use of more flexible employment contractsbetween the two time points, together with more fiexible working arrangements,for example, hot desking The rapid emergence of contracting as a major issuebetween the two time periods raises some interesting questions about the Buidnature of organizational boundaries, and the nature of the attachment of indi-viduals to the organization. The HP Way as a tool of cultural control is clearlybeing stretched when individuals are no longer part of the formal organization.We also need to consider the boundaries of human resource management. Matusikand Hill (1998) point out that contingent workers play a significant role in gener-ating firm perfbrmance. If such workers are outside the remit of the company'sformal HR policies, this raises the question of the extent to which HR is actuallyable to infiuence those behaviours that contribute to performance across allmembers of staff, and also what exactly it is that we should be looking at whenwe seek to measure the relationship between HRM and performance.

We have therefore found a rich tapestry of data and experiences from our ex-amination of Hewlett-Packard. The conflicting results we have found and the dis-crepancies between rhetoric and reality suggest that we need to revisit some of thetheoretical frameworks that have been used to model the relationship betweenHR processes and outcomes. Approaches such as the resource based view, humancapital theory and the contingency perspective only appear to capture one part ofthe equation, since they focus on the issue of how inputs in terms of company

Blackwcli Publishers Lid 2001

1146 C. TRUSS

human resource policies are turned into outputs in the form of improved perfor-mance at the individual and organizational levels. What this study has shown isthat the concept of agency also needs to be considered. Guest (1997) touched onthis when he suggested that intermediary variables such as motivation act as arationale for why human resource processes might be transformed into individualoutputs and hence firm performance. We should not assume that simply having aparticular human resource policy will necessarily lead to a desired outcome. Prob-lems of implementation and interpretation occur alongside people's sometimesunpredictable responses and actions.

CONCLUSION

There are, inevitably, some limitations to this study Firstly, the analysis is basedon just one case-study, and there is the usual problem of generalizability, particu-larly in view of the fact that Hewlett-Packard is acknowledged as being a successfulorganization. Secondly, through the use of qualitative techniques, many of thedimensions investigated cannot be easily replicated. Thirdly, not all relevantaspects of HRM were investigated through the data collection; some themes,which were later found to be highly significant, only emerged by serendipitythrough the interview programme. These clearly need further, systematic, investi-gation. However, this paper has brought to light some important issues for thosepursuing quantitative research in this area, notably the importance of adoptingbroad measures of performance at the individual and organizational levels, andof examining HRM not only at the level of policy, but also of practice.

A number of findings have emerged from this study Firstly, we have seen thatwe cannot consider how HRM and performance are linked without analysing,in some detail, how policy is translated into practice through the lens of theinformal organization. Secondly, we have discovered that the notion of what con-stitutes 'good performance' needs to be disaggregated, and that we need tocompare and contrast performance measures at a variety of individual and or-ganizational levels if we are to gain a real insight into what 'performance' means.Thirdly, we have raised the important question of what exactly we should belooking at when we seek to measure 'human resource management' and link it toperformance. The issues around the changing boundaries of the organization,together with the significant role played by the informal organization, suggest thatthe traditional functional approach may be redundant in the face of organiza-tional realities.

NOTES

*I would like to thank Norvald Instefjord for help with the financial analysis and statistics,and Christine Edwards, Veronica Hope-Hailey and Jean Woodall for helpful commentson an earlier draft. I would also like to thank the anonymous referees for their thoughtfulinsights.[1] Cady Fiorina's recent appointment as CEO and the corporate restructuring she has

put into place will undoubtedly mean that the company will have changed furthersince this study was conducted.

Blackwdl Publishers Lid 2001


REFERENCES

ARTHUR, J. B. (1994). 'Effects of human resource systems on manufacturing performanceand turnover'. Academy of Management Journal, 37, 670-87.

BARNEY, J. (1991). 'Firm resources and sustained competitive advantage'. Journat ofManagement, 17, 99-120.

BARNEY, J. (1995). 'Looking inside for competitive advantage'. Academy of ManagementExecutive, 9, 4, 49-61.

BARTEL, A. P. (1994). 'Productivity gains from the implementation of employee trainingprograms'. Industriat Relations, 33, 411-25.

BECKER, B. and GERHART, B. (1996). 'The impact of human resource management onorganizational performance: progress and prospects'. Academy of Management Journat, 39,4, 779-801.

BECKER, B. E., HUSELID, M . A., PICKUS, P. S. and SPRATT, M . E (1997). 'HR as a sourceof shareholder value: research and recommendations'. Human Resource Management, 36,1, 39-47.

BEER, M . et al. (Eds) (1984). Managing Human Assets. New York: F

Truss 2001

Documents

Transcript of Truss 2001