Lecture 7-HR Systems and Culture-3

22/04/2020 1 WORK5002 Course Coordinator and Lecturer: Dr. Ju Li Ng HR Systems and Culture The University of Sydney Page 2 Lecture Outline HR System - Definition - Frameworks The Role of "Strength" in the HRM system (Bowen and Ostroff, 2004) Foundational understanding: - Definitions of culture and climate - HR, culture and climate Bowen Ostroff (2004)'s Framework to design a strong HRM system - Three distinction elements - Extension and new knowledge on the 'strength' of HRM System Concluding Remarks The University of Sydney Page 3 HR Systems (Monks et al., 2013) - HR systems are variously defined. HR Processes HR Practices HR Policies Multilevel Organisational Team Individual/Employee HR Policies Outcomes: HR Practices HR Practices HR Processes 1 2 3

22/04/2020 2 The University of Sydney Page 4 HR Systems Frameworks: Examples and Definitions High Performance Work System (HPWS) Commitment-based HR Configurations This approach requires the development of mutual commitment between employer and employee based on high levels of trust and empowerment (Wood, 1996) Controlled-based Systems Typically a control approach is applied to jobs with low levels of skill variety, only provides basic levels of autonomy, and minimises expenditure on people management (Cogin et al, 2016) A set of human resource (HR) practices aimed at increasing employees' abilities, motivation, and opportunity to participate in decision making (Li et al., 2011,p.1825) The University of Sydney Page 5 Monks et al (2013)'s Recommendation: Configure HR Systems The University of Sydney Page 6 Reflection and Analysis Based on the concepts and definitions you now know about HR system, pick an organisation you know, or you have or are working for, and examine if you can tease out the three components of the HR system. In addition, using a multilevel framework, can you see how the different components of HR systems play out in the organisation? How about the outcomes you see as a result of a strong HRM system? 4 5 6

22/04/2020 3 The University of Sydney Page 7 HRM Systems' "Strength" (Bowen and Ostroff, 2004) - This work by Bowen and Ostroff (2004) has extensive citations that has led research in HR - HR Systems (bundle or coherent system of mutually enforcing practice) can send signals to employees that allow them to understand the desired and appropriate responses and form a collective sense of what is expected (p.204) - They defined this as "Strong climate", which can be viewed as 'strong situation; where employees share a common interpretation of: • What is important • What behaviours are expected and rewarded - "Strength of the HR system" Strong HRM will positively influence performance through organisational culture and climate The University of Sydney Page 8 Culture, Climate and HR (Bowen and Ostroff, 2004) - Organisational Culture is - conceptualised as the embedded assumptions and values - " A common perception held by the organisation's members; a system of shared meaning " - "the way we do things around here" - Function as an antecedent to the HR systems - Organisational Climate - "shared perception of what the organisational is in terms of practices, policies, routines, and rewards - what the organisation is and what behaviours are expected and reward" (p.205). The University of Sydney Page 9 Organisational Culture and Its Levels: Iceberg Metaphor Values Espoused: what members of an organisation say they value Enacted: reflected in the way individuals actually behave Assumptions - deeply held beliefs that guide behavior and tell members of an organisation how to perceive and think about things Artefacts - symbols of culture in the physical and social work environment Visible, often not decipherable Greater level of awareness Taken for granted, Invisible, Preconscious 7 8 9

22/04/2020 4 The University of Sydney Page 10 Culture in Research and Practice - Organisational culture has been widely studied. - It is very popular in both academia and consulting. - Culture has been studied in various areas: - High performance culture - Innovation culture - Digital culture - Research on organisational culture has been examined with the following variables: - Job satisfaction and organisational commitment (Lok et al., 2004) - High performance work systems and firm effectiveness (Den Hartog & Verburg, 2004) The University of Sydney Page 11 Designing a Strong HRM System HR Policies HR Processes HR Practices Distinctiveness Consistency Consensus The University of Sydney Page 12 HRM "Strength": Distinctiveness (Bowen and Ostroff, 2004, p.208) Visibility • The degree to which HR practices are salient and readily observable • Is the practice clearly disclosed to employees? • E.g. pay secrecy or clear performance indicators for promotion and pay? Understandability • A lack of ambiguity and ease of comprehension of HRM practice content • This means employees must be able to understand how the practice works. E.g. complex practices such as profit sharing, succession plans Legitimacy of authority • The legitimacy of the HR system and its agents facilitate submission to the necessities of cooperative systems • E.g. are the senior executives investing and supportive HRM function and investment Relevance • Whether the practice is defined in such a way that the employees see the situation as relevant to an important goal • Relevance enhances the distinctiveness of the HRM system • In situation where relevance is not strong established then legitimacy plays a greater role Refers to the features that allow the situation to stand out in the environment, thereby capturing attention and arousing interest (p.208) Distinctiveness 10 11 12

22/04/2020 5 The University of Sydney Page 13 HRM "Strength": Consistency (Bowen and Ostroff, 2004, p.211) Instrumentality • Establishing an unambiguous perceived cause-effect relationship in a reference to the HRM system's desired content-focused behaviours and associated employee consequences • Here HRM staff and managers play a key role in establishing instrumentality as they have the power and resources to determine the cause-effect attributions Validity • It essentially means "the practice does what it says it will do" • Validity makes a symbolic contribution by signalling to employees what knowledge, skills and abilities (KSA) are valued in a setting Consistent HR Messages • HR messages that convey compatibility and stability in the signals sent by the HRM practices Consistency • Establishing an effect over time and modalities whereby the effect occurs each time the entity is present (i.e. consistent relationships, people and context, and HRM messages • The features of HRM system that are internally aligned (Li et al., 2011) The University of Sydney Page 14 HRM "Strength": Consensus (Bowen and Ostroff, 2004, p.212) Agreement among principal HRM decision makers • HRM decision makers all agree and united in the decisions and messaging, or • HRM decision makers all disagree and united in the decisions and messaging Fairness • Adhering to the principles of delivering three dimensions of justice • Distributive: allocation of outcomes • Procedural: perceived fairness of the process by which outcomes were arrived at • Interactional: focus on the interpersonal side of organisational practices (treatment and communication by management to employees) Consensus Agreement among employees (p.212). It is related to consistency The University of Sydney Page 15 Reflection and Analysis II Reflect on the organisation you work for or use an organisational case study. Use each element highlighted by Bowen and Ostroff (2004) and evaluate if the HR policies, HR practices, and HR process meet the criterion proposed. Are there any other elements that influence the strength of the HRM system that have not been highlighted in Bowen and Ostroff (2004)? 13 14 15

22/04/2020 6 The University of Sydney Page 16 New Research on HRM System Strength The University of Sydney Page 17 HRM Strengths: Other Considerations (Ostroff & Bowen, 2016) HRM Strength as Continuums and nonlinearity • Strengths can be calculated through addictive model or a combination across the features Consensus as a precursor • Consensus among the decision makers and agents should be the precursor element for the other two elements to work effectively Configurations of HRM strengths features • Some configurations or patterns across dimensions maybe more important than others The University of Sydney Page 18 HRM Strengths: Multi Stakeholders (Ostroff & Bowen, 2016) The role of a leader • Consider the variability of the various executive leaders • Leader factors and styles that work in conjunction with the HR system Employee within the HRM Systems • Consider the framing of communications which has influence on the employees' sense-making process, motivation, and employees' attribution about the intent of the HR practice The impact of HRM on customers • Customers can be a key resource for firms, which has implications on HRM strength 16 17 18

22/04/2020 7 The University of Sydney Page 19 Evidence of Bowen and Ostroff (2004)'s Work (Li et al., 2011) Method: Survey Setting: Three five-star hotels in Shanghai, Ningbo and Dongguan in China Findings: • Employee perceptions of the distinctiveness, consistency, and consensus associated with so-called high-performance HR practices significantly contribute to employees' work satisfaction and vigor, and reduce their intention to quit • Two cross-level interaction effects were found significant in this study: (1) HPWS climate strength moderates the relationship between consensus and work satisfaction, and (2) HPWS climate strength moderates the relationship between consensus and intention to quit. Both interactions suggest that the relationship between consensus and employee outcomes is stronger when HPWS climate strength is higher. The University of Sydney Page 20 Implications and Concluding Discussion (Li et al., 2011) - Cultural Difference (Consistency) - Sanders et al (2008): consistency and affective commitment has a positive relationship  implications of negative relationship with intention to quit - Li et al. (2011): positive relationship between HRM consistency and intention to quit for Chinese hotel employees • Value the 'rule-of-man' rather than 'rule-of-law' as a governance system. This means, the Chinese seldom question the decision makers as they value social relationships more than formal rules in management decision-making - Cultural Difference (Consensus) - Consensus is more valued in China due to the collective culture when compared to Sanders et al. (2008)'s study in the Netherlands The University of Sydney Page 21 HRM System Strength: Using a Cultural Lens (Farndale & Sanders, 2017) Conceptualisation and Propositions • National culture values: consciously and subconsciously held set of beliefs and norms; it is the social norms • The cultural dimensions of a national culture will influence how HRM system is being perceived • Proposition 1 : Power distance will moderate the relationship between employee perceived HRM system strength and employee attitudinal and behavioral outcomes; such that this relationship will be stronger in national cultures with low (rather than high) power distance. • Proposition 2 : Uncertainty avoidance will moderate the relationship between employee perceived HRM system strength and employee attitudinal and behavioral outcomes; such that this relationship will be stronger among employees in national cultures with high (rather than low) uncertainty avoidance. 19 20 21

22/04/2020 8 The University of Sydney Page 22 Concluding Remarks › HRM systems have been cited and used rather extensively. However it is important to note the various components of HRM systems. › We have also examined the element of organisational culture, climate and HR, and how this influence the HRM system › Bowen and Ostroff (2004)'s work proposed three distinct elements of distinctiveness, consistency and consensus, in designing a strong HRM systems. This would be a good starting point. › There are other factors and considerations (Farndale & Sanders, 2017; Ostroff & Bowen, 2016) which highlight the need to consider other multifaceted factors (e.g. culture and stakeholders) and complexities when designing the HRM system References ** Bowen, D., & Ostroff, C. (2004). Understanding HRM-firm performance linkages: The role of the "Strength" of the HRM system, Academy of Management Review , 29(2): 203-221. Cogin, J., Ng, J.L., Lee, I. (2016). Controlling healthcare professionals: How human resource management influences job attitudes and operational efficiency, Human Resources for Health , 14:55-63. ** Farndale, E. & Sanders, K. (2017). Conceptualizing HRM system strength through a cross-cultural lens, The International Journal of Human Resource Management , 28(1): 132-148. Li, X., Frankel, S., & Sanders, K. (2011). Strategic HRM as process: how HR system and organizational climate strength influence Chinese employee attitudes, The International Journal of Human Resource Management , 22:9, 1825-1842. Monks, K. Kelly, G. Conway, E. & Flood, P. (2013). Understanding how HR systems work: The role of HR philosophy and HR processes, Human Resource Management Journal , 23(4):379-395. Ostroff, C., & Bowen, D. E. (2016). Reflections on the 2014 decade award: Is there strength in the construct of HR system strength? Academy of Management Review, 41 , 196-214. Wood S. (1996). High commitment management and payment systems. Journal of Management Studies , 33(1):53-77. ** Required Reading for this course. 22 23