The Organization Of Work And Organisational Performance

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02 Nov 2017

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NAME: Merylann Cecilia Cato-Francis

COUNTRY: Grenada, W.I.

COURSE TITLE: MSc. In Performance Management and Workplace Learning

MODULE TITLE: The organization of Work and Organisational performance – (Module 2)

ASSIGNMENT QUESTION: "To what extent is product market strategy is an effective predictor for the relationship between skills and performance".

TOTAL WORD COUNT: 4,809

DATE: 11th February, 2013

Module 2 assignment question #2

Question, "To what extent is product market strategy an effective predictor for the relationship between skills and performance?"

Answer:

As a result of worldwide changes in business conditions, their market environments may shift dramatically. In these new worldwide business conditions, a common theme is the crucial role that human resource management plays in the success or failure of organistions. Organisation performance will enhance to the degree that the organization adopt human resource management practices that complement and support other elements of the organisation’s strategic plan. (Fisher et al. 2006) In most companies, production is organise in order to achieve objectives and in the process, the organization selects and shape the skills of those within; in an attempt to secure competitive advantage in the market. (Ashton and Sung, 2006)

In addition, The International Labor Conference (ILC) made the following fundamental conclusion that relates to skills and productivity at the workplace, and along value chains that businesses should adopt:

"Sustainable enterprise should innovate, adopt appropriate environmentally friendly technologies, develop skills and human resources, and enhance productivity to remain competitive in national and international markets. Moreover, ILC have agreed that their members should "promote the expansion of workplace learning and training through the utilization of high-performance work practices that improve skills (96th session, Geneva, 2007, para. 13). (ILC., Report V. 2008).

In an attempt to answer the assignment question, this paper will investigate the extent to which the firm’s product market strategy impacts the firm’s labour force skills and performance. The workforce skills of most organisations form an integral part in the development and success of a firm’s product market strategy, since it underpins the effectiveness to which it can compete in competitive markets, which in turn have implications on the organisation’s performance. (Ashton and Sung, 2006).

The following three key terms are defined in the context of the question:

-Product market strategy,

-Skills and

-Performance

A recent study done by (Zott and Amit, 2007) defines Product market strategy (PMS) as a pattern of managerial actions that explains how a firm achieves and maintains competitive advantage through positioning in product markets.

Grugulis and Stoyanova (2006) argued that skills are complex, and it is a multifaceted construct that is difficult to define. It may be possessed by individuals, through qualifications, experience, experts or attributes. It is built into jobs, the successful completion of which may demand autonomy, decision making, technical knowledge or responsibility. It produces and is itself the product of status.

Grugulis and Stoyanova (2006) argued that, performance is not readily defined or measured; at least in the sense that there is no one single measure of organizational performance. For instance;

"For organizations in the private sector there is a range of financial ratios including share prices, profit turnover and dividend cover used to measure performance. A specialist in employment might assess absenteeism, staff turnover, staff cost and the presence or absence of various human resource practices. For individuals, they may include pay rates, job satisfaction, status, career opportunities and more. While national governments, for their part, might be interested in the extent to which that firms contribute to civil society, employment growth and investment plans." (Grugulis and Stoyanova, 2006).

In presenting the argument, this paper divides into five sections. Section one assesses the essential elements of a firm’s product market strategy, Section two argues how the labor force skills can impact on performance. Section three argues the extent to which product market strategy is a useful indicator of skills and performance in the workplace, while section four argues how Human Resource policies and practices along with other management practices impacts the skills set in the workplace, Section five sums up the main argument and draws conclusions from the preceding analysis and discussion.

In order to demonstrate an in-depth understanding of how the firm’s product market strategy can impact on the labor force skills and performance it is relevant to have an insight of the term "business strategy". (Yao-Sheng Liao, 2005) defined business strategy as an "integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage". (Dess et al., 1995 cited in Liao, Y., 2005) further support this definition by stating that "Business-level strategy is designed to provide value to customers and gain a competitive edge by exploiting core competences in the specific individual product market." The idea here is that the firm’s business strategy is an important factor that determines how the firm would compete to gain and maintain market share.

The former paragraph examined what a business strategy is about; our focus now is product market strategy. "Product market strategy concerns how a business intends to compete in the market it serve, mapping the planned patterns of resource deployments through which the firm attempts to achieve its goals". (Edward, et al. 2007) In so doing, some firms may choose to develop their product market strategy first, then identify the relevant skill, based on the type of strategy adopted. Alternatively, some firms may first identify the skills available within the firm, then proceed to develop the product market strategy to fit with those available skills identified. Whichever approach is adopted it would have implications for the skills set by the organization and in turn determine the level of performance of the organization.

According to (Yarbrough et al. 2010) Product market strategy is typically conceptualized in terms of two fundamental decisions. First, product market scope, which concerns the extent to which a business plans to target broad groups of customers or to focus on a niche. Second, the value proposition to be delivered, which concerns the benefit or cost bundle by which a business seeks to attract and retain targeted customers and achieve its strategic objective. Value proposition comprises two core product market strategy components: The first entails the superiority of the product or service, the performance benefits to be gained from the product, and the quality of service offered to target customers relative to those offered by their competitors. The second component concern, the cost effectiveness of delivering the product or service to target customers. The extent to which resources and inputs are deployed efficiently can enhance efficiency and keep costs minimal.

Some firms develop their business strategy based on the type of industry they operate in for example some may adapt an approach based on three themes, that is, being cheap, being better and being first to gain a competitive advantage. Dench et al., (2000) found that in the food manufacturing some companies achieved their competitive advantage on the three themes. On the other hand some companies develop their strategy around employee’s skills and technology. (Ashton and Sung, 2006) argues that the term Low Road strategy is associated with mass productionn and low skilled labour while High Road strategy is associated with high skill labour and differentiated product strategy.

Many factors determine a firm’s product market strategy. An effective market strategy should be developed based on the characteristics and culture of the business. The degree to which a business product market strategy is developed is likely to have an effect on its performance. (Donaldson, 1996 cited in Zott, C., Amit, R., 2007) supports this view by suggesting that:

"…Strategy variables are identified according to certain contingency factors such as aspects of the environment, organizational structure, technology and marketing structure. Firms should explore how these contingents and other factors interact with the business strategy variables to determine the firm’s performance."

Based on (Donaldson, 1996) idea, it is imperative that a firm adopt the most suitable strategy considering its contingency factors to maximize its potential.

It is important to mention that a firm’s product market strategy can face challenges or market pressure from other competitors that can affect the profitability of the firm. For example, (Dench et al., 2000) found that in the Food Manufacturing companies, some companies experience market pressure because other firms penetrated the market providing improved goods and services at competitive price due to changes in customers' needs and taste. Due to the competition, the manufacturing firms experience loss of market share and loss of sales, which impacted negatively on the business performance.

Consequently, this gives rise to changes in management practices in responding to those challenges. There was the need to create efficiency in the production process and improvement to the product itself. This lead to new skills requirement in the organization in order to implement the changes. Having examined the product market strategy, it will be useful to discuss how the labor force skills can impact on performance in attempting to understand the product market strategy and its implication for skill and performance at the workplace.

According to the ILC report, skill is considered to be a fundamental condition for the performance of four important areas in the workplace, namely: competitiveness, sustainability, raising revenue, higher profit and improving productivity. The input of skills is one of the vital significant drivers of productivity, growth and competitiveness at the enterprise level. As a result, it was agreed that employers and staff should agree to work together in the interest of both parties since this is a prominent means of promoting workplace learning and ensuring that productivity benefit both the company and employee. For instance, (Nubler, 2008b, cited in ILC report, 2008) has suggested that collective bargaining should motivate workers to engage in training and promote an environment of trust between management and workers, with both parties expected to gain from investment and skill. The implication here is that if managers and employees have a good relationship workers would be more inclined to continue to enhance their skills that would improve organizational performance.

In addition, ILC claims that "maintaining a high level of competitiveness depends in part on the ability of firms and employees to change and innovate." "It is further argued that firms who innovate in product and processes grow faster and are more likely to expand their employment than none innovative ones." A well-trained and skilled workforce strengthens the capacity for both individual creativity and group innovation. (Amabile, 1996, Cited in ILC report, 2008). Successful innovation also requires a high level of skilled labor working alongside research and learning at all levels. This idea is further supported by (David et al., 2006) suggesting that, "in the People Development approach, management sees the skills of the entire labor force as providing an important component of the competitive advantage of the firm". Because the employee's skills are so crucial for the business success; skills issues are an integral component to the business model.

Despite the ILC position regarding the importance of the labor force skill for performance at the organisational and the individual level, there is still the contention that employee's skills are seen as unimportant to their business. For example, (Edwards et al., 2007) in a research entitled "Managing Work in Low-Skilled Equilibrium"; there is little connection between firm’s competitive strategy and skills. He noted that this was relevant in both cases where the business operated in strong as well as in a relatively weak market position. The research claims that in some instances, it was the product that gave the firm a competitive edge and in others, it was the nature of production. The implication is that the skills of the labor force did not have any significant input in the competitiveness and sustainability of the performance of the organization’s product or service as directed by the ILC report.

Despite the debate concerning the impact of skills on performance, this section review at other writers on the subject. According to (Grugulis and Stoyanova, 2011), there is a difficulty in assessing the impact of skills on performance. This may be due to the difficulty and complexity of both. For example, some firms do not compete based on skills because of the nature of the organization, for instance, in some parts of the service-sector, skills is totally unrelated to performance because it forms no part of the work process. (Felested et al., 2007) supports this idea by adding that "in the British Labor market, there are very high numbers of jobs that requires no skill and in some parts of the service sector, may require unskilled people to carry out certain task, rather than making any serious change to their work processes, or product specification that could be costly. While this view may hold true, it could be relevant for some organizations, again considering other contingent factors as advocated by (Donaldson, 1996).

In addition, some management sees labor force skills as a cost or liability on their books and would prefer to invest very little or none on skills in their organization. However, with this philosophy, a business has to guard itself since according to (Konzelmann et al., 2005) Firms that does not see training and investing in workers skill as important is likely to have low performance or experience failure. As the debate among skills implication in the workplace continues, Evidence has shown that there are some organizations which cannot survive without a highly skilled workforce. For example, APPLE INC. Annual Report, 2012 has indicated that the company invested heavily in training their employees to maintain a highly skilled workforce in order to sustain competitive edge since their market survival depends highly on skilled employees. Similarly, in IKEA retail store worldwide they are able to maintain high organizational performance because they compete on developing employee skills and commitment while attempting to keep cost down. (Konzelmann, e al., 2005).

In addition, (Hogrth et al., 2006) research report has revealed that a lack of skilled workforce in some workplace has had negative implications on their business performance. For example, a lack of Information Technology skills led to delays in new products and process development, difficulty in achieving organizational changes, delays, or failure in meeting standards and a lack of efficiency upon the part of the organization. It is evident from the discussions that workforce skills can affect organizational performance.

Having discussed some of the implications of skills in the workforce we will proceed to investigate how the product market strategy can impact the skills of the workforce. According to (Hogart et al., 2002), Product market strategy is not readily concerned about developing skills among the workforce. It is concerned primarily with new-product development, maximizing market share, cost control, the efficiency with which goods and services are produced and more. While it is true in the sense that PMS does not concern much about the workforce skills because it is aligned to HR perspective, it should not be ignored, that the workforce skill underpins marketers in developing a valid marketing strategy. In addition, it is the workforce skills that will support the marketing strategy when responding to market pressure. In other words, the PMS is more likely to shape the workforce skills need to be in sync with its strategy.

As noted earlier, some companies such as those in engineering, finance, and telecommunication require significant investment and are risky; may be inclined to develop their objectives then determine what strategy that can achieve the objectives. For instance, firms of this nature are likely to penetrate the market using a high-road strategy creating differentiated products, consuming highly skilled labor to achieve quality or value added advantage over their competitors.

To successfully achieve this objective the PMS would depend on the ability of the organization to identify and deploy the relevant skills, technology and other resources that are consistent with the strategy to achieve the goals.

However, it is argued by some writers that firms who compete on high level strategy may not necessarily need highly trained and skilled personnel to compete effectively. For example, (Mason, 2005, cited in Ashton et al., 2006) has found that some companies that compete using a high-road strategy did not use highly trained personnel. While Mason's view may be true, it is very difficult to accept since, other researchers such as (Hogarth et al., 2002) who conducted a research in the United Kingdom Market has proven this to be inconsistent with their conclusion. They have found that, companies such as engineering and telecommunications who compete on high-road strategy with greater investment, and higher risk could have only survived using highly skilled personnel. In other words, with the assistance of highly skilled employees, firms were able to respond to their competitors quickly, they were able to meet customers demand, and create innovative products using the skills of employees.

In addition, this idea is further supported by (Lazonick, et al., 1990, cited in ILC report, 2008). They claimed that "firms who have formed alliances to improve on their competitive strategy have harness technology, skills and knowledge to develop higher value added products". The technology may be used to add new features to existing products or to develop new products. Firms who acquire new technology need specialized skills to drive technology at its maximum thus leading to economie of scale.

Conversely, some companies such as those operating within the catering industry, food manufacturing and hotels may choose to develop their strategy based upon the availability of workforce skill within the organization. These types of firms are given to a low road strategy supplying standardized goods or services such as routine production, or fast food using forms of mass production and low skilled labor to achieve a cost advantage in the market. Unlike firms who choose the high-road strategy and gain at a competitive edge. However, firms using the low road strategy approach are more likely to maintain a low status quo. Therefore, their market strategy may be able to survive on their available skills since the strategy was developed in keeping with the level of existing skills. This approach has its advantage in that, cost is kept at a minimum, for example, less funds are budgeted for training and recruitment. It is argued that firms engage in this type of strategy do not need highly skilled and knowledgeable employees because of the nature of the production process. These firms can compete with an unskilled workforce to maintain a competitive edge.

Although most literatures have associate low road strategy with low skill workers, (Sung and Ashton, 2005) found, cases of companies selling standardized low cost products but achieving a competitive advantage in the market through the use of more highly skilled employees. This could be as a result of the market in which they compete.

Both Low road strategy and high-road strategy compete in a competitive market but at varying degree and may face certain challenges or pressure from competitors. To continue surviving, the respondent firm should assess their current market position and respond to those challenges. In most cases, the response has implications for skills and the Human Resource policies and practices. (Hogarth and Wilson, 2002) argued that, "skills needed as a result of PMS challenges were often centered around higher level skills" this could be as a result of the difficulty to recruit and to retain persons who are highly educated. On the other hand, It is much easier to identify and recruit persons with low skill and are less educated. Where firms have difficulty identifying relevant skill that is consistent with the PMS the implications can be severe on the ability of the PMS to perform effectively which in turn negatively impacts the organization’s performance.

It was cited earlier that workforce skills do have some form of implications for performance; it was also argued that PMS has some level of implications for skills in the workforce. This brings to the forefront the role of Human Resource (HR) in organizing work efficiently and ensuring that the organization is staffed with employees who possess the right skills and knowledge along with training to function effectively, and achieve the strategic goals of the organizing. In light of this, we proceed to discuss how HR Policies and practices can impact on workforce skills to improve performance.

Recent studies such as (Tamkin, 2005) promotes the view that some of the best practices for utilizing and retaining skills in the workplace and improving employee performances are thought the use of High Performance Work Systems (HPWs) or work practices, and other management practices such as: management by objectives, business processes re-engineering & outsourcing, employee involvement, quality approaches in particular total quality management (TQM) and Learning organisation. This viewpoint is supported further by (Smith et al., 2008) who argues "that skill retention and skill utilization was most effective in the workplace that was engaged in high performance work practices". We will engage some discussion on the HPWs.

According to ILC, with High performance work practices, work is organized efficiently to get the best from employees, paying attention to the division of labor, within the firm, and how work is organized between product and service delivery". This is particularly useful where firms PMS are facing certain challenges. For example, in the 1980s when Xerox was faced with stiff competition from the Japanese market they respond by introduce high performance work systems as a means of improving efficiency to respond to customers needs.

As stated by (Marchington and Grugulis, 2000) and (Danford et al., 2004, cited Ashton et al., 2006) when high performance work practices are adopted in a working environment is likely to be more contentious. They further argued that, the use of High performance work practices can lead to work intensification and negative effect on employee motivation. In addition, (Lloyd and Payne, 2004) argue that, the impact of HPWs on skills can be problematic. This could be as a result of the workload pressure employees may face with the new system along with the desire for high attainment.

High performance Work Practires allows employees to learn, grow, and develop by utilizing their skills within the company and engage in intense training both internally and externally can motivate employees to remain and be productive in their jobs, resulting in overall growth of the business. This idea is supported by (Parry, 2008, cited in CLMS, M2 U2) "firms which focus on developing their own employees rather than recruiting externally, were more successful than those which recruited externally".

It is important to note that HPWs may not be appropriate for all firms therefore, firms who choose to adopt the strategy should consider their PMS. For example, companies operating mass production, low value added marketing strategy such as the cookie market in the USA. (Mason, 1999) argues that, in addition, where employers are operating in labor intensive and low value the determinant of scale is cost. There may be little to be gained through these practices.

On the other hand according to, (Steve, 2000) this strategy will be appropriate in industries where they are pursuing a strategy of differentiation, they compete on the basis of quality service.

In addition, firms using HPWs when engaged in improving performance to maintain a competitive edge, the organization through HR may look at organizational changes which may include new practices. For example, the introduction of Management by Objectives (MBO). This approach was introduced by Peter Drucker in 1954. It is a useful tool for measuring performance at both the levels of the organization and employee. The process brings management and employees together to establish work objectives based on their job description along with progress report at intervals. (Odiorne, 1995, cited in CLMS, M2 U4) define MBO as:

"A process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individual major areas of responsibility in terms of the result expected from the individual, and use these measures as a guide for operating the unit and assessing the contribution of each member." (Odiorne, 1955)

MBO could be very useful to businesses because it can be used as a tool to address issues of measurement, clarify organizational objectives and to make clear individual role within a unit or department. In addition, it identifies or measure employee performance so that they could be rewarded based on their performance, which can act as a motivator for employee commitment. It can also measure the overall organizational performance, for example, management may want to benchmark their performance against their competitors. Thereby identify unattained goals and take corrective measures.

While this process may be useful, it is criticized by writers such as (Mullin, 2005) and, (Levinson, 2003) who argues that it has a narrow concept because it focuses on specific organizational performance, thereby ignoring the individual. For example, it may only consider performance relating to a person’s job description and ignoring other areas. It also has the danger of over-emphasis on the main organizational objective that can lead to developing objectives which are difficult or unattainable by individuals who are expected to achieve them.

In addition to HPWs and MBO organizations can use Business Process Re-engineering (BPR) and outsourcing as a means of finding new ways of improving employee skills and performance. This approach involves examining the effectiveness of the entire existing work processes and structures from scratch with the intention of redesigning the processes if necessary. Generally, this process is carried out using computerized systems or technology to reshape processes to improve performance. For example, it can be used to create efficiency in the processes to which new products are developed and how additional features are added to existing products using skilled employees in the field of Information Technology. These new structures would undoubtedly create the need for HR to identify and deploy persons with the relevant skill set such as Information Technology (IT) to implement those processes. (Kitchin and Blackburn, 2002:36, cited in Ashton and sung, 2006) argue that changes in procedures and processes:

"… Are likely to necessitate adjustments in individuals’ work roles, and consequently, in the skills and knowledge required to facilitate their successful implementation."

However, (Hammer, 1990) argued that managers should not focus on IT alone as a means of solving problems but they should also focus on removing none value added activities from their system. For example a telephone service provider in Grenada by the name of (LIME) removed their telephone directory assistance from their system and outsource to another Island. Removing non-value added activities would have no implication for automation since automation along with IT support can be a costly venture to the organization. This is important since the aim is to maximize cost and minimize resource input.

Similar to BPR is outsourcing, which has implications for workplace skills and performance. (Barthelemy, 2003) define Outsourcing as transferring all or part of an organization’s activities to an external vendor. Outsourcing is a powerful tool to cut cost, allow management to refocus on core benefits and improve performance. Firms using this approach are likely to transfer the non-core activities to an external specialist firm. For example, (LIME) has outsourced some of their services to other different companies throughout the Caribbean thereby allowing them to cut cost and improve performance. Conversely, workers were laid off which can impact negatively on the remaining employees and could in turn affect their commitment to the company.

Outsourcing has implications for HR policies and practices. It can generate adverse effects on employee. For example, job insecurity and the belief among employees that management lost confidence in their skills. HR has to implement practices that can regain the trust of employees.

Outsourcing has also created the need for skills. Specialized skills are needed on the production line and the value chain to ensure efficiency in production in delivery of the product or service to their customers. HR policies should confirm with the skills need hence improvement in efficiency and performance.

In conclusion, the findings revealed that a firm’s product market strategy impacts the workforce skills and performance. In doing so, it explores the central aspects of the product market strategy. Which revealed that the product market strategy is a fundamental aspect of a firm’s business strategy in providing value to customers and achieving competitive advantage. There is a relationship between skills and performance in the sense that skills impacted on the performance at both the level of the individual and the company. The findings also show that the firm’s product market strategy had severe implications for the workforce skills, it revealed that some firms relied on their labor skills in order to maintain market share by developing new product and in some areas redesigning the products or service, while others depended on the product and not skills. It was also found that the important role workforce skills play in the product market strategy and the performance of the business, it was crucial that Human Resource develop and implement policies and strategies that support the skills of the organisaiton; in particular, where product market strategy face challenges. Human Resource also incorporates other useful performance tools such MBO, Business process re-engineering, Outsourcing and High performance work practices to improve performance in the organization. The evidence put forward validates the extent to which product market strategy is an effective predictor for the relationship between skills and performance.

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