Financial performance review of literature
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I. Contents of financial performance review of literature
Human resources are considered by many to be the most important asset of an organization, yet very few employers are able to harness the full potential from their employees (Radcliffe, 2005). Human resource is a productive resource consisting of the talents and skills of human beings that contribute to the production of goods and services (Kelly, 2001). Lado and Wilson (1994) define human resource system as a set of distinct but interrelated activities, functions, and processes that are directed at attracting, developing, and maintaining a firm’s human resources. According to Gomez-Mejia, Luis R., David B. Balkin and Robert L. Cardy, (2008), it is the process of ensuring that the organization has the right kind of people in the right places at the right time. The objective of Human Resources is to maximize the return on investment from the organization’s human capital and minimize financial risk. It is the responsibility of human resource managers to conduct these activities in an effective, legal, fair, and consistent manner (Huselid, 1995).
Employee Training and Development
Training and development is a subsystem of an organization that emanate from two independent yet interdependent words training and development. Training is often interpreted as the activity when an expert and learner work together to effectively transfer information from the expert to the learner (to enhance a learner’s knowledge, attitudes or skills) so the learner can better perform a current task or job. Training activity is both focused upon, and evaluated against, the job that an individual currently holds (Learner R., 1986). On the other hand development is often viewed as a broad, ongoing multi-faceted set of activities (training activities among them) to bring someone or an organization up to another threshold of performance. This development often includes a wide variety of methods, e.g., orienting about a role, training in a wide variety of areas, ongoing training on the job, coaching, mentoring and forms of self-development. Some view development as a life-long goal and experience. Development focuses upon the activities that the organization employing the individual, or that the individual is part of, may partake in the future, and is almost impossible to evaluate (Nadler Leonard, 1984).
Training and development ensures that randomness is reduced and learning or behavioral change takes place in structured format. In the field of human resource management, training and development is the field concerned with organizational activity aimed at bettering the performance of individuals and groups in organizational settings. It has been known by several names, including employee development, human resource development, and learning and development (Harrison Rosemary, 2005).
As the generator of new knowledge, employee training and development is placed within a broader strategic context of human resources management, i.e. global organizational management, as a planned staff education and development, both individual and group, with the goal to benefit both the organization and employees. To preserve its obtained positions and increase competitive advantage, the organization needs to be able to create new knowledge, and not only to rely solely on utilization of the existing (Vemic, 2007). Thus, the continuous employee training and development has a significant role in the development of individual and organizational performance. The strategic procedure of employee training and development needs to encourage creativity, ensure inventiveness and shape the entire organizational knowledge that provides the organization with uniqueness and differentiates it from the others.
The Value of Training and Development
According to Beardwell& Holden (1997) human resource management has emerged as a set of prescriptions for managing people at work. Its central claim is that by matching the size and skills of the workforce to the productive requirements of the organization, and by raising the quality of individual employee contributions to production, organizations can make significant improvements on their performance.
The environment of an organization refers to the sum total of the factors or variables that may influence the present and future survival of an organization (Armstrong, 1998). The factors may be internal or external to the organization. Cascio W. F, (1995), uses the terms societal environment to define the varying trends and general forces that do not relate directly to the company but could impact indirectly on the company at some point in time. Four of these forces are identified as economic, technological, legal and political and socio-cultural and demographic forces. The second type of environment is the task environment that comprises elements directly influencing the operations and strategy of the organization. These may include the labour market, trade unions, competition and product markets comprising customers, suppliers and creditors. The task environment elements are directly linked to the company and are influenced by the societal environment.
However, variables in the task, competitive or operative environment as they are variously referred to, affect organizations in a specific industry and it is possible to control them to some extent. As such, environmental change, whether remote or task, disrupts the equilibrium that exists between the organization’s strategy and structure, necessitating adjustment to change. Pfeffer (1998) proposes that there is evidence demonstrating that effectively managed people can produce substantially enhanced economic performance. Pfeffer extracted from various studies, related literature, and personal observation and experience a set of seven dimensions that seem to characterize most if not all of the systems producing profits through people. He named them the seven practices of successful organizations and they are: employment security, selective hiring of new personnel, self-managed teams and decentralization of decision making as the basic principles of organizational design, comparatively high compensation contingent on organizational performance, extensive training, reduced status distinctions and barriers, including dress, language, office arrangements, and wage differences across levels, and extensive sharing of financial and performance information throughout the organization.
Effect of Training and Development on Employee Productivity
McGhee (1997) stated that an organization should commit its resources to a training activity only if, in the best judgment of managers, the training can be expected to achieve some results other than modifying employee behaviour. It must support some organizational goals, such as more efficient production or distribution of goods and services, product operating costs, improved quality or more efficient personal relations is the modification of employees behaviour affected through training should be aimed at supporting organization objectives.
Effect of Training and Development on Employee Motivation
Motivation is concerned with the factors that influence people to behave in certain ways. Arnold etal (1991), have listed the components as being, direction-what a person is trying to do, effort- how hard a person is trying to and persistence- how long a person keeps on trying. Motivating other people is about getting them to move in the direction you want them to go in order to achieve a result, well motivated people are those with clearly defined goals who take action that they expect will achieve those goals. Motivation at work can take place in two ways. First, people can motivate themselves by seeking, finding and carrying out that which satisfies their needs or at least leads them to expect that their goals will be achieved. Secondly, management can motivate people through such methods as pay, promotion, praise and training (Synderman 1957). The organization as a whole can provide the context within which high levels of motivation can be achieved training the employees in areas of their job performance.
Effect of Training and Development on Competitive Advantage
Competitive advantage is the essence of competitive strategy. It encompasses those capabilities, resources, relationships, and decisions, which permits an organization to capitalize on opportunities in the marketplace and to avoid threats to its desired position, (Lengnick-Hall 1990). Boxall and Purcell (1992) suggest that ‘human resource advantage can be traced to better people employed in organizations with better processes.’ This echoes the resource based view of the firm, which states that ‘distinctive human resource practices help to create the unique competences that determine how firms compete’ (Capelli and Crocker- Hefter, 1996). Intellectual capital is the source of competitive advantage for organizations. The challenge is to ensure that firms have the ability to find, assimilate, compensate, and retain human capital in shape of talented individual who can drive a global organization that both responsive to its customer and ‘the burgeoning opportunities of technology’ (Armstrong, 2005)
Effect of Training and Development on Customer Relations
William Edward Deming, one of the quality Gurus defines quality as a predictable degree of uniformity and dependability at low costs and suitable to the market, he advises that an organization should focus on the improvement of the process as the system rather than the work is the cause of production variation (Gale 1994). Many service organizations have embraced this approach of quality assurance by checking on the systems and processes used to deliver the end product to the consumer. Essentially this checks on; pre-sale activities which encompass the advice and guidance given to a prospective client, customer communications ( how well the customers are informed of the products and services, whether there are any consultancy services provided to help the customers assess their needs and any help line available for ease of access to information on products), the speed of handling a client’s transactions and processing of claims, the speed of handling customers calls and the number of calls abandoned or not answered, on the selling point of Products/Services a customer would be interested to know about the opening hours of the organization, the convenience of the location and such issues (Gale 1994). This is only possible when employees are well trained and developed to ensure sustainability of the same.
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Financial performance review of literature updated: July 13, 2014 author: