HRM Revision Questions & Answers (APR-14)
HRM Revision Question Practice (APR-14)
Q1) Critical Evaluation of Performance-Related Pay (PRP) as a Means of Rewarding Staff (100 marks)
Answer Plan
A good answer will touch on some or most of the following points:
- Mention the aims of a rewards system as defined by Hills, Berhgmann, and Scarpello (1996): attract, retain, and motivate employees. Consider the extent to which PRP meets these criteria.
- PRP is one element of a strategic approach to reward management that links individual rewards to organizational performance. The assumption is that financial rewards linked to performance motivate increased performance. Many schemes exist, but all involve pay rises or bonuses for individual employees. Two distinct varieties are merit-based and goal-based systems.
- Merit-based systems: Involve supervisor appraisal of each subordinate’s performance over a fixed period, generally after a formal appraisal. Percentages can be awarded against different criteria or a simple rating scale (e.g., excellent, good, satisfactory, inadequate). Seen as subjective and open to bias.
- Goal-based systems: Considered more objective but not suitable for all jobs. Supervisor and subordinate agree on objectives at the start of the appraisal period. At the end, the employee is assessed based on goals met, and a score determines a bonus or pay rise.
Theoretical Attractions of PRP
- Attracting and retaining good performers
- Improving individual and organizational performance
- Improving motivation
- Reinforcing management control
- Identifying developmental objectives
- Rewarding individuals without promotion
- Withholding pay rises when necessary
- Individualizing the employment relationship
Difficulties Associated with PRP
Many difficulties relate to the practical application of PRP principles. Individuals have different motivations, and pay is only one factor. Expectancy theory suggests that people won’t respond to incentives if the potential reward isn’t worth the effort. Transparency in pay progression is also a concern.
Critiques of PRP
- Damages the long-term health of the organization by undermining relationships
- Encourages a focus on short-term aims
- Difficult to implement, leading to the loss of good employees
- Employees develop a narrow focus on work, concentrating on reward-generating aspects
- Undermines team working, a key aspect of HRM
- Priorities shift, making previous objectives redundant
- Employees rarely control the outcomes of their performance
- Managers find it difficult to give fair and objective appraisals, leading to bias
- Discourages creative thinking
- Budgetary constraints lead managers to centralize rankings and not reward excellent performers
- Inflates the wage bill as managers avoid demotivating staff with low or no pay rises
When is PRP Appropriate?
- Individual performance can be objectively measured
- Individuals control the outcomes of their work
- Close team working or cooperation are not central to job performance
- An individualistic organizational culture exists
A good answer will also touch on total reward management and consider how it meets the needs of both the organization and the individual.
Q2) Does HRM Represent a Decisive Break from ‘Traditional’ Personnel Management? (100 marks)
Answer Plan
A good answer will cover some of the following points:
- Personnel Management: Defined in various ways, including the Institute of Labour Managers’ definition as the part of management concerned with human relationships within an organization, aiming to enable maximum personal contribution to the organization’s effectiveness.
- Traditional Personnel Management: Concerned with recruitment, selection, training, terms of employment, working conditions, joint consultation, and dispute settlement procedures. Grounded in a welfare tradition, mediating between the organization and the workforce. Focused on the quantity of labor, with the job prioritized over the person. Held pluralist values, recognizing competing sources of authority (e.g., trade unions) and viewing conflict as inevitable. Emphasized the workforce, not the individual. Primarily operational, advising on and implementing HR systems, with a partial role in people management.
- HRM: Built on assumptions such as the workforce being the most important asset, people providing the competitive edge, training and development being crucial, and the individual being rediscovered and freed from organizational constraints. Claims to be too important for HR specialists alone, requiring line manager involvement. Applies to everyone in the organization, not just managerial or professional staff. Integrates areas like recruitment, selection, induction, appraisal, rewards, and development across the business. Culture management is crucial for successful HRM implementation, and the HR function becomes central to the organization. Identifies with management, adopting a unitarist perspective where conflict is abnormal. Has a clearer connection between business strategy and HR strategy. Claims to be strategic, unlike the operationally focused TPM. Both perform similar functions (e.g., recruit, select, train, reward, fire), but HRM engages the individual, seeks commitment, demands more at every level, and wants employee identification with organizational objectives. May be a difference in labeling or ‘old wine in new bottles’.
A better answer will examine the differences between the rhetoric and reality of HRM. There’s limited evidence of systematic adoption of HRM theory and practice. As a largely American creation, its exportability is questionable.