1. MANAGING PEOPLE AND ORGANISATIONS
BHM206
PART 1
HUMAN RESOURCE MANAGEMENT THEORY AND PRACTICE
REPORT SUBMITTED BY
VOVWE CALEB MUOGHEREH
K1161172

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EXECUTIVE SUMMARY
The formal organisation of people to achieve set objectives has drawn the attention of
researchers to focus on how people can be managed effectively in concurrence with
agreed organisational goals. Recent works suggest that former sources of competitive
advantage enjoyed by firms are becoming less reliable than they once were and focus
is now on the use of the human resources of a firm to gain this competitive edge.
Research on the contribution of human resources to the overall performance of an
organisation gave rise to the People and Performance Model by John Purcell and his
colleagues (Purcell et al, 2003), and the Performance Management Model by Michael
Armstrong (Armstrong, 2009a). This report will take a look at both models and examine
how they affect the performance of an organisation, what factors can support or limit
their application within a firm, and who is responsible for their effectiveness-the senior
management, HR department, front line managers or the employees. The report also
investigates the issue of best practice and best fit HRM policies and how this applies to
organisational performance. Measurement of performance is crucial as the organisation
constantly needs to know her position in terms of the achievement of set goals.
However, the view of performance in this report will be from the behavioural and
managerial perspective because economic and financial reports are insufficient in
determining the impact of HR practices on the performance of an organisation. The
importance of line managers with respect to the successful implementation of the HR
strategy of an organisation has been emphasized in existing literature and this is also
looked into.
The methodology applied in this report takes a theoretical approach by exploring
existing literature. This approach is influenced by the suggestion of Harney and Jordan
(2008) that a theoretical approach could help in investigating espoused and applied HR
practices. The report concludes with discussions and further recommendations on how
an organisation can apply HRM practices strategically in such a way that the business
objectives are not compromised.

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INTRODUCTION
Human Resource Management (HRM) deals with all the activities involved in the
management of work and people in an organisation whether they work individually or as
members of a group (Boxall and Purcell, 2011). Armstrong (2008, 2009a) defined HRM
as the strategic, unified and consistent approach to the recruitment, development and
welfare of the people that work in an organisation. Armstrong (2009a) further argued
that the main aim of HRM is to ensure that the success of the organisation is achieved
through people. Caliskan (2010) adds that the performance of an organisation is
significantly affected by the way the organisation manages its human resources.
However, as organisations seek competitive advantage in their environments, staff
retention continues to be a challenge (Luna-Arocas and Camps, 2008). Barney (2001),
the resource-based view theorist, opines that by developing skills that are unique to an
organisation, HR systems can add to the competitive advantage of the organisation.
The economic objectives of HRM as stated by Boxall and Purcell (2011) are to develop
a system to manage labour cost-effectively, to ensure the viability of a firm in times of
economic uncertainties by maintaining some level of flexibility, and to have a
competitive advantage by adopting HRM within the organisation (Boxall and Purcell,
2011).
HRM differs across tiers in an organisation, industries, firms, occupations and societies
and the most reliable way to perceive the HRM strategy of an organisation (the set of
objectives, resources and qualified personnel, crucial to the survival of an organisation
in a particular industry) is by observing the behaviour of the organisation rather than
looking into documented plans (Boxall and Purcell, 2011). Strategic HRM harmonizes
the Human Resource strategy with the overall objectives of an organisation (Caliskan,
2010).
Recently, the economic environment has experienced a revolution characterised by
radical changes in the behaviour of customers, competitive markets and globalization
and the reliance on product and process technology, controlled markets and economies
of scale as a source of competitive advantage is being replaced by the need to develop

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people and manage them effectively (Caliskan, 2010). This report will look at two
models that have been developed to investigate the role of human resources within an
organisation and how it affects the overall performance of the organisation: the People
and Performance Model by Purcell et al (2003) and the Performance Management
Model by Armstrong (Armstrong 2009a; 2009b).
People and Performance Model
The Bath People and Performance model (Purcell et al, 2003), (figure 1), highlights
three key areas of HRM where line managers have significant influence on individual
performance. These are:
 ability, which is an indication that individuals possess the necessary skills, and
expertise required for a job;
 motivation, suggesting that employees are personally inspired to work and are
encouraged well enough to work; and
 opportunity, demonstrating that the structure of work supports and avails
individuals an avenue to contribute and express themselves
(Boxall and Purcell, 2011).

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Figure 1. Bath People and Performance Model. Source: „Understanding the People and Performance
Link: Unlocking the Black Box‟ Purcell et al, 2003.
This model is known as the AMO framework and is a key determinant in the
performance of an organisation (Purcell et al. 2003). Harney and Jordan (2008),
underscore the importance of the AMO model affirming that it provides an explanation
for the inconsistency between advocated and applied HR practices. Yet, Purcell et al.
(2003) note that these three are not the only factors that have an effect on HRM further
stating that the quality of information systems and the financial position of an
organisation are other considerable determinants. In addition, they propose that the
following practices are needed to convert the AMO framework into action:
 Recruitment and Selection (matching people with required competence and culture
that fits with the overall organisational strategy),

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 Training and Development (ensuring the workforce is well equipped intellectually
and skilfully for immediate and future benefit of the organisation, and encouraging
discretionary learning),
 Career Prospect (actively engaging the skills of employees in tasks that they find
challenging enough, and the existence of opportunities for growth within the
organisation),
 Communication (conveying the mission and objectives of the organisation, and
eliciting feedback from employees),
 Employee Involvement (encouraging employees to voluntarily contribute to the
achievement of organisational goals in an environment of trust where the
„psychological contract‟ is made clear),
 Teamwork (using teams to harness the ability of employees),
 Appraisal (assessing employee performance),
 Remuneration (paying a comparatively high salary to encourage employees to
remain with the organisation),
 Job Security (assuring employees that job cuts will be avoided as much as possible),
and
 Work-Life Balance
(Purcell et al, 2003; Marchington and Wilkinson, 2005; Tam, 2008; Caliskan, 2010).
Purcell et al (2003) further argue that the implementation of these practices, which are
often designed by specialists, require the input of front line managers who could,
through their leadership skills, encourage discretionary behaviour from employees
working under them and eventually bring about improved performance. Likewise, Mwita
(2000) supports this argument maintaining that the employee‟s action is a reflection of
the manager‟s behaviour towards training, guidance and leadership. Thus, managers

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are placed in the centre of the Bath People and Performance model (Purcell et al.
2003).
Another determinant of high performance is the existence of a precise mission spread
throughout an organisation. The mission, which gives focus, requires time, energy, and
foresight, and is supported by the values and customs that the organisation maintains
and seeks to accomplish (Purcell et al, 2003). This „Big Idea‟ is ingrained, linked,
shared, long lasting and evaluated and managed within the organization and is difficult
to imitate. The satisfaction of the customer is linked with employee behaviour and
attitude which are derivatives of the mission of the organisation (Purcell et al. 2003).
Purcell et al (2003) demonstrated that good team work, employee involvement in
decision making, career opportunities, and maintaining a good team environment are
positively linked with job satisfaction, described by Spector, (1997) as the way people
feel about their jobs and various aspects of their jobs, and can encourage commitment
from employees. However, Spector (1997) argued that job satisfaction is also influenced
by the way employees judge payment policies to be fair as against differences in pay
levels further stating that other determinants include how employees are treated, the
nature of work tasks, work relations with others, and reward schemes. Still, Purcell et al
(2003) maintained that employee commitment was positively correlated with
communication, satisfactory training and development schemes, pay satisfaction, job
autonomy and career opportunities. Similarly, Hutchinson and Purcell (2007) assert that
employees showed a higher level of satisfaction where they saw their jobs as
demanding and where they had a comparatively higher level of autonomy in how they
carried out their jobs.
PERFORMANCE MANAGEMENT
Performance management is a means of improving results by understanding and
supervising organisational performance in line with planned goals, principles, and
required skills (Armstrong, 2009a). Aguinis (2009) posits that it is the continuous
process of identifying, evaluating, and developing the performance of individuals and

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teams in line with the strategic objectives of an organisation (cited in Aguinis, Joo and
Gottfredson, 2011). Armstrong (2009a) further asserts that the primary objective of
performance management is to develop the competency of individuals to meet and
surpass expectations and to reach their full potential in a way that benefits both the
organisation and themselves.
Performance management uses the approach of management by objectives focusing
on set goals, standards, and performance indicators and is concerned with evaluating
outcomes in the light of performance delivery when compared with agreed objectives
(Armstrong, 2009a). Thus, the fundamentals of performance management are
agreement, assessment, feedback, positive assurance, and dialogue (Armstrong,
2009a).
The main objectives of performance management are: aligning personal objectives of
employees with overall organisational objectives, also referred to by Tam (2008) as
vertical integration, while encouraging them to embrace the core values of the
organisation; defining and agreeing expectations from employees in terms of job
responsibilities, required skills, and accepted behaviour; and encouraging employees to
define their personal goals and build on their skills and capabilities (Armstrong, 2009a).
This view of performance management suggests that the interests of the worker and the
employer can be combined and achieved together. Nevertheless, Tam (2008) argues
that this approach to performance management is of limited applicability in some
sectors of the economy (e.g. the public sector) suggesting that the practices used in an
organisation to manage performance should be matched to the realities facing the
organisation.
Buchner (2007) (cited in Armstrong 2009a; 2009b) highlighted goal theory, control
theory and social cognitive theory as the fundamental theories for performance
management. Armstrong (2009a; 2009b) further demonstrates the connection between
the goal theory and performance outcomes by stating that goals focus attention on
priorities, inspire effort, stimulate learning and skills of individuals, and encourage
individuals to give their best as the goals become more demanding. Goals include the

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outcomes produced by workers (results) as well as how these outcomes are achieved
(behaviour) (Aguinis et al, 2011). Likewise, Mwita (2000) classifies results as primary
objectives and the means of achieving these results as secondary objectives.
Control theory is based on the use of feedback to shape behaviour and forms an
important part of the performance management process (Armstrong, 2009b). „Social
cognitive theory‟ involves developing and strengthening positive self esteem in
employees and is an important aspect of performance management because people‟s
belief of themselves affects their performance in the organization (Armstrong, 2009a).
Difference between Performance Management and Performance Appraisal
Performance management has been distinguished from performance appraisal.
Whereas performance appraisal is the official assessment and scoring of individuals by
their managers during or after a review meeting which is often a bureaucratic scheme
owned and controlled by the HR department, performance management is viewed as an
ongoing process where management defines expectations with emphasis on the role
that line managers can play in supporting and coaching workers under them (Armstrong
2009a).
For the performance management model to be effective, employees‟ performance must
be vertically integrated with organisational objectives, measured and noticed and the
performance management practices within the organisation should not only be
assessed from an economic point of view, but also consider the social, behavioural and
managerial perspectives (Mwita, 2000; Harney and Jordan, 2008). Also, to ensure the
effectiveness of the performance management process through the participation of
employees in goal achievement, line managers need to be empowered with some level
of autonomy (Walker, Damanpour and Devece, 2010). This involves including them in
the development and introduction of performance management, and training and
coaching existing and potential managers (Armstrong, 2009a).

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DISCUSSION
The research on HR practices in dynamic economic environments has produced two
major schools of thought. Some scholars suggest that there are practices that can be
applied in any organisation which can help the organisation successfully achieve set
objectives (best practice). However, this has raised questions of how these practices
are specified and whose interest they represent (Boxall and Purcell, 2011). The second
school of thought proposes that organisations will need to consider the environment in
which they operate as well as the other business objectives of the firm and determine
what practices best suit them accordingly (best fit). Still, this also raises questions of
what variables within a firm‟s environment are most critical to sustained competitive
advantage and how they are connected (Boxall and Purcell, 2011).
The People and Performance Model sought to establish the connection between
practices that can bring about sustained competitive advantage and employee
commitment. However, Marchington and Wilkinson (2005) argued that there are doubts
on the extent to which the implementation of HR policies can achieve employee
commitment noting that the willingness and ability of employers, the particular set of HR
practices applied, inconsistencies in the implementation of polices across organisations,
and the acceptance of these practices by employees make it difficult to conclude on the
specific combination that fits an organisation. Similarly, Purcell et al. (2003) also
supported by Harney and Jordan (2008) acknowledge that improving commitment from
workers might be more complex than it initially appears as not all workers may be willing
to give high commitment to their employers especially where their jobs are seen as
routine and others may find the policies not good enough. Indeed the presence of
antecedents to encourage certain behaviours (such as employee commitment) in the
work place cannot control or guarantee such behaviours but can, at best, provide a
background for their occurrence (Mwita, 2000). Harney and Jordan (2008) in supporting
the „best fit‟ proposition refuted the assumption that organisations have complete control
on what HR policies they implement, assert that the policies enacted are also subject to
factors such as immediate cost control measures and a need for quick adjustment

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within the organisation and will depend on the context within which the organisation
operates. Even where practices have been identified to suit an organisation in a given
environment, the practices on their own are not the source of competitive advantage but
the way they are implemented is critical to how effective they become (Purcell et al,
2003).
In performance management, linking HR practices with organisational performance is
fraught with some complications. Some of these problems are associated with
weaknesses in the design and implementation of appraisal schemes in organisations
(Mwita, 2000). Another challenge is the lack of applicable data. In some organisations,
measurements of performance are often based on financial data rather than aspects
such as the attitude and performance of employees and the extent of applied HR
policies (Purcell et. al. 2003; Marchington and Wilkinson, 2005). Nevertheless, the
availability of applicable data does not imply that the same criteria can be applied
across organisations (Marchington and Wilkinson, 2005). Also, frequent collection of
applicable data can produce numerous measures of performance making it even more
difficult to select relevant measures as a result of conflicting signals emerging from the
interpretation of gathered data (Purcell et al. 2003). In knowledge-intensive
organisations, it is not easy to ascertain the connection between input and output
because of the tacit nature of the numerous processes involved thereby making the
measurement of performance in such establishments difficult (Purcell et al, 2003).
Nevertheless, Armstrong (2009a) suggests that this difficulty can be lessened with a
clear delineation of outputs (results that can be quantified) and outcomes (observable
effects that result from efforts but cannot be quantified). Still, there may be other factors
such as technological changes, fluctuating market conditions, and performance
assessment which could make it difficult to compare results between periods of
measurement (Purcell et al. 2003).
The Role of Line Managers.
Both the People and Performance model and the Performance Management model
emphasize the role of line managers in realizing organisational objectives. The

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behaviour of line managers towards HRM and other employees is linked to employee
job satisfaction and commitment which can in turn encourage discretionary behaviour
from employees (Harney and Jordan, 2008). Similarly, Armstrong (2009a) noted that
one reason why performance appraisal schemes fail is that either line managers are
indifferent about the process or they lack the required skills. Nevertheless, managers
have a significant influence on employees‟ sense of career opportunity and satisfaction
with existing appraisal schemes and those who feel they have received adequate
coaching from their line managers show more commitment to their organisation (Purcell
et al 2003).
The function of line managers is limited by factors such as client requirements, and the
nature of work but they still possess influential capacity to mediate between external
control factors and internal motivation of workers to ensure sustained organisational
performance (Harney and Jordan, 2008). Getting line managers involved in the
development of the performance appraisal process, providing them with the necessary
training, giving them support from senior management, keeping the process simple, and
assuring them of the benefits of the performance management process can help to
equip them with the required skills and encourage the needed cooperation from them
(Armstrong, 2009). Indeed, the quality of leadership displayed by line managers
significantly affects the fulfilment employees get from working in a team as well as their
satisfaction with other aspects of HR policy and practice (Purcell et al, 2003).
CONCLUSION AND RECOMMENDATION
The People and Performance model and the Performance Management model can both
contribute to the competitive advantage of an organisation. It is important to note that
the model an organisation chooses should not separate the HR objectives from the
strategic business objectives of the organisation. Rather it should seek to help the
organisation achieve these objectives while maintaining sustained competition in their
business environment. It may not be feasible to have a given set of HR practices that all
organisations can adopt as there are no “one size fits all” HR strategies. Hence,
organisations should consider the political, ethical, social, technological, legal, and

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economic environments (PESTLE) in which they operate and determine the best
practices that will suit them while maintaining some degree of flexibility that will facilitate
swift response to changes in their environment. This will require constant and ongoing
appraisal of the performance of employees in line with the strategic objectives of the
organisation.
This study has reflected that the role of line managers irrespective of the chosen model
is critical to organisational performance because it is these managers that can
effectively execute the appraisal process, they are also responsible for the
implementation of the chosen HR practices, and they can encourage employees under
their supervision to buy into the „big idea‟ of the organisation thereby inspiring
discretionary behaviour which is key for developing a proactive, engaged and
productive workforce, ultimately increasing the chances of creating and maintaining
sustainable competitive advantage in organisations. Also, it is not an either-or situation
but practices from both models can be combined as it best suits the organisation
involved bearing in mind the dynamic nature of business environments.

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