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Correlation between Employee Performance and HR Policies of Trust or Control

HRM systems may be broadly defined as control or commitment type. The 21st century has seen a shift in orientation of HRM systems from the ‘traditional’ control approach to an emphasis on high commitment. While this is assumed to be more effective,
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  Organizational Behavior   Study  Correlation between Employee Performance and HR Policies of Trust or Control   O(ER(IE) Building on from the mid term report, we decided to conduct further secondary research on our hypothesis. However, scope for the same was limited to International studies. In order to validate the same in the modern Indian context, we conducted a survey as a means of primary analysis. 310 professionals were studied across 6 broad industries - Manufacturing & Operations, Software & IT, Analytics and Consulting, Architecture and Design, Finance and Marketing. BACKGROUND HRM systems may be broadly defined as control or commitment type. Control systems seek to establish order, exercise control, and achieve efficiency through the enforcement of organi”ational controls. In contrast, the organi”ations that rely on a high-commitment strategy aim at getting more from workers by giving more to them and emphasi”e teamwork, open communication and high trust. The 21st century has seen a shift in orientation of HRM systems from the ‘traditional’ control approach to an emphasis on high commitment. )hile this is assumed to be more effective, the contingency perspective of strategic HRM argues that its effectiveness is subjective to change and can vary on an organi”ation’s external and internal context, including labor market conditions, si”e, life cycle, industry specifics or business strategy. Firms performance may depend on the external and internal context which can give rise to hybrid systems that can lie in the wide spectrum between control and high commitment HRM. 6 The construct of trust in an organi”ational context may be considered as three-dimensional, composing of harmony, reliability, and concern. Reliability here is when the authority trusting party has positive expectations about the consistency between words and action of the employee. Concern refers to the idea of a balance between organi”ational interest and an employee’s self-interest. Harmony denotes the existence of commonly shared values and a collective identity. 5   For the purpose of this report, ‘trust’ is understood as opposite of control. The survey we conducted is designed to contrast Control based policies vs trust based policy.   Tobuildthecaseforcontrolandtrust,westudiedtwoorgani”ationsfromourmidtermanalysis that transformed themselves from more control / less trust to less control/ more trust policies. Parameters   Semco Partners Sources: [1] GE Sources: [2] [3] Landmark Events Financial misfortune in 1980; Followed on because of success 2009: months after company filed bankruptcy. 2016: based on consumer reviews Change Company How? Target Culture Target Culture )hat changed? Policy definition, trust the employee Policy definition, trust the employee )hy? Most managers and outside board members agreed on two immediate needs: to professionali”e and to diversify ..the merit of sharing experience is to encourage experiment and to plant the seeds of conceptual change. Immelt’s priority of growing GE by focusing more on expanding businesses and creating new ones than on making acquisitions. ...some of it to be really honest is millennial based. It’s trying to make the place more modern, friendly, welcoming, and open. Results Semco is now one of Bra”il’s fastest-growing companies, with a profit margin of 10% in 1988 with sales of $37 million. GE went from net loses in 2015 to making profits upwards of $8000 million in 2016 . Althoughtheabovecompaniesincorporatedinnovationbyvirtueofacrisis,wealsoobservethat theydidsowithspecificgoals.Bothcompaniesstrivedtopivot,diversify,experimentand change.Giventheresemblanceinthepathtakenandissuesfaceditsuggeststhatthelow control/ high trust culture delivered the objective. Asweexploredthisideafurther,wecameacrossmultipleperspectivesonhowHRpolicies encouragingmoretrustandlesscontrolaffectorgani”ationalaspectslikejobsatisfaction, innovation,jobcommitmentandinvolvementindecisionmaking.Thefollowingsectiondescribes the hypotheses that emerged as a result of our analysis of the same.     ANALYSIS Hypothesis 1: A more trusting/less control environment leads to innovation )edecidedtodivefurtherandlookedintotheattributesofanInnovativeOrgani”ation.This chartcomparestheaveragescoreofthe GEPowerGenerationteamafterthe transitiontolesscontrolpolicieswiththe averagescoresof10innovativeandfive stagnant organi”ations. 3 )efindthistobeinsyncwithour hypothesis.So,trust/opennessand freedomhaveanimportantcorrelation withinnovation.Itneedstobeintegrated intoHRpoliciesforanorgani”ationto create a similar environment. Further,alookattheForbesInnovation List   showsacorrelationof    0.25 between thesumofthecontrol/trustpoliciesof  HRM   7 andInnovationPremium   8 ofthe top companies.   Survey Results: Outofthe98respondentswhohaveratedtheircompany’sHRpolicyasTrustingEmployees, 61 respondents 62.2% have said the firms had high innovation. Ontheotherhand,amongthe82respondentswhohaveratedtheorgani”ation’sHRpoliciesas Controlling employees, only 18 22% respondents have said the firms had high innovation. Clearly,thefirmswhoseHRpolicieswereperceivedas‘trusting’ratherthan‘control’werealso perceived to be more likely to facilitate high level of innovation. Hypothesis 2: Millennials’ job satisfaction is high in work environments with less control ThesameisreportedinGEcommunications   3 andissightedinouranalysisofnewercompanies likeFB.   Glassdoor.comhasratedthefirmNo.1foremployeesatisfactionanditsemployeesrate   its CEO No. 1 with an almost perfect 99 percent approval rating. 4  FBlaysemphasisonopenness,collaborationandinnovation.Thesameisreflectedintheir architecture-openfloorplansandfreeaccess,flowingpathways.TheFBheadquarterhasafully stockedvideo-gameroom,amovietheater,aprintshop,askateboardcourse,andfree on-campusbicycles.Continuousfeedbackensuresthatemployeesareinvolvedinthe developmentoftheorgani”ation.OnFridayafternoons,theCEOmakeshimselfavailableinan opentoall-employeesq-and-ameeting.Anopen-bookmanagementapproachisalsoanother waytorevealthatmanagementtrustsitsemployees.Facebookbelievesthataccesstoasmuch informationaboutthecompanyaspossible.Theyalsohaveunlimitedsickleavesandnodress code policy. 4  Survey Results: a. Ofthe18Millennialsagegroup18-24whohaveratedtheirorgani”ation’sHRpolicyas trusting employees, all 100% experienced high job satisfaction.    b. Ofthe23Millennialsagegroup18-24whohaveratedtheirorgani”ation’sHRpolicyas ‘controlling employees’, 14 respondents 61% experienced lowest/little job satisfaction. Thisagreeswithourhypothesisthatmillennialsexperiencegreaterjobsatisfactioninwork environments that are more trusting with lesser controls. The above 2 formed our initial hypothesis. However in the process of our literature study, we also came across the following two hypothesis. Hypothesis 3: Managers are more likely to allow employees to participate in decision making when trust is high/ control is low )ereferredtoShayS.T”afrir’s2005studyof104HRmanagersfromtheleadingcompaniesin theIsraeliindustrial,serviceandtradesectors,basedonsalesandoperatingrevenue. Organi”ationalperformanceinthesecompanieswasmeasuredasafunctionofHRpolicies,trust in employees, employee performance etc. 5 Theresultsindicatethatorgani”ationswheremanagersexhibitgreatertrustintheiremployees encouragedgreateremployeeparticipationindecisionmakingactivitieswith59%correlation. Further,57%correlationwasobservedbetweenemployeeparticipationandorgani”ational performance.Overall,theresultsshowhighcorrelation72%betweenorgani”ational performance and the dimension of trust. 5  T”afrirfurthersupportshisdatabythestudyof43USautomotivefirmsconductedbyAckroyd andThompsonin1999whichdemonstratedthathighmanagerialtrustleadstohighemployee participation. 5  )e decided to validate the same in the Indian context and arrived at the following results.
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