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CHAPTER 16
CREATING AND MAINTAINING HIGH-PERFORMANCE
ORGANIZATIONS
Chapter Summary
This chapter summarizes the role of human resource management in creating an organization that
achieves a high level of performance, measured in terms such as long-term profits, quality, and
customer satisfaction. First, the chapter defines high-performance work systems and provides a
description of these systems elements and outcomes. Next, it discusses the conditions that
contribute to high performance. This is followed by an explanation of how the various HRM
functions can contribute to high performance. Finally, the chapter introduces ways to measure
the effectiveness of human resource management.
Learning Objectives
After studying this chapter, the student should be able to:
1. Define high-performance work systems and identify the elements of such a system.
2. Summarize the outcomes of a high-performance work system.
3. Describe the conditions that create a high-performance work system.
4. Explain how human resource management can contribute to high performance.
5. Discuss the role of HRM technology in high-performance work systems.
6. Summarize ways to measure the effectiveness of human resource management.
Extended Chapter Outline
Note: Key terms are boldface and are listed in the Chapter Vocabulary section.
I. Introduction
1. Organizations must design work and performance management systems so that they bring
out the best in the employees. These challenges are some of the most crucial
responsibilities of human resource management.

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II. High-Performance Work Systems
1. An organizations success depends on how well it operates how well it acquires and uses
people, technology, resources, and processes to meet its goals.
2. High-performance work systems the combination of people, technology, and
organizational structure that makes full use of the organizations resources and
opportunities in achieving its goals.
3. To function as a high-performance work system, an organization needs the right people,
technology, and structure.
4. According to research, organizations that introduce high-performance work practices
usually experience increases in productivity and long-term financial performance.
5. Creating a high-performance work system contrasts with traditional management
practices. Recently, managers have realized that success depends on how well the
elements work together rather than considering the elements as separate, unrelated items.
A. Elements of a High-Performance Work System
1. In a high-performance work system, a number of elements must work together. These
elements include organizational structure, task design, people (the selection, training,
and development of employees), reward systems, and information systems.
2. Figure 16.1 depicts the elements of a high-performance work system.
3. Organizational structure refers to the way the organization groups its people into
divisions, departments, and reporting relationships.
4. Task design involves determining how the details of the organizations activities will
be grouped into jobs or team responsibilities.
5. Training, development, and career management ensure that the selected employees are
able to perform their current and future jobs with the organization.
6. Reward systems contribute to high performance by encouraging people to strive for
objectives that support the organizations overall goals.
7. Modern information systems, including the Internet, have enabled organizations to
share information widely.
B. Outcomes of a High-Performance Work System
1. The elements of high-performance work systems influence the organizations
achievement of its goals.

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2. The outcomes of a high-performance work system include high productivity and
efficiency. These outcomes contribute to higher profits.
3. A high-performance work system may have other outcomes as well including high
quality, great customer satisfaction, and low employee turnover.
4. Figure 16.2, Outcomes of a High-Performance Work System: Examples, looks at
examples of the outcomes of a high-performance work system.
5. In a high-performance work system, the outcomes of each employee and work group
contribute to the systems overall high performance.
III. Conditions the Contribute to High Performance
1. Many conditions can contribute to the formation of a high-performance work system.
2. Table 16.1 shows examples of conditions that are common practices in high-performing
organizations.
A. Teamwork and Empowerment
1. Todays organizations empower employees. In other words, they expect employees to
make more decisions about how they perform their jobs.
2. One of the most popular ways to empower employees is to design work so that it is
performed by teams.
3. For empowerment to succeed, managers must serve in linking and coordinating roles.
B. Knowledge Sharing
1.

Learning organization an organization in which people continually expand their

capacity to achieve the results they desire.

2.

The people in a learning organization are in a constant state of learning. Their

learning results from monitoring the business environment, taking in information,
making decisions, and making changes in the organization based on what they learn.

3.

A learning organization has the key features identified in Figure 16.3, Key Features
of a Learning Organization, and includes continuous learning, generation and
sharing of knowledge, thinking that is critical and systemic, a culture that values
learning, encouragement of flexibility and experimentation, and appreciation of
value of each employee.

4.

Continuous learning refers to each employees and each groups efforts to gather
information and apply the information to their decisions.

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5.

In many organizations, the process of continuous learning is aimed at improving

quality.

6.

Knowledge is most valuable to the organization when it is shared.

7.

Critical, systemic thinking occurs when organizations encourage employees to see

relationships among ideas and to test assumptions and observe the results of their
actions.

8.

A learning culture is an organizational culture in which learning is rewarded,

promoted, and supported by manager and organizational objectives.

9.

This culture may be reflected in performance management systems and pay

structures that reward employees for gathering and sharing more knowledge.

10. In a learning organization, employees are valued. It therefore focuses on ensuring

the development and well being of each employee.
C. Job Satisfaction
1.

In a high-performance organization, employees tend to experience job satisfaction

that is, they experience their jobs as fulfilling important values or allowing them to
fulfill those values.

2.

Research supports the idea that employees job satisfaction and job performance are
related.

3.

Some organizations are moving beyond concern with mere job satisfaction and are
trying to foster employees passion for their work. Occupational intimacy refers to
people being passionate about their work and feeling that it is a part of who they are.

D. Ethics
1.

Ethics establishes fundamental principles for behavior, such as honesty and fairness.

2.

Ethical behavior is most likely to result from values held by the organizations
leaders combined with systems that promote ethical behavior.

3.

A number of organizational systems can promote ethical behavior including a written

code of ethics, reinforcement of ethical behavior, channels for questions regarding
ethical behavior, and training for ethical decision-making.

IV. HRMS Contribution to High Performance

1. Management of human resources plays a critical role in determining companies success
in meeting the challenges of a rapidly changing, highly competitive environment.

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2. Compensation, staffing, training and development, performance management, and other
HRM practices are investments that directly affect employees motivation and ability to
provide products and services that are valued by customers.
3. Table 16.2 lists examples of HRM practices that contribute to high performance.
A. Job Design
1. For the organization to benefit from teamwork and employee empowerment, jobs
must be designed appropriately.
2. Often, a high-performance work system places employees in work teams where
employees collaborate to make decisions and solve problems.
B. Recruitment and Selection
1. At a high-performance organization, recruitment and selection aim at the kinds of
employees who can thrive in this type of setting. These employees are enthusiastic
about and able to contribute to teamwork, empowerment, and knowledge sharing.
2. High-performance organizations need selection methods that identify more than
technical skills.
C. Training and Development
1. Extensive training and development are an important part of a learning organization.
D. Performance Management
1. To set up a performance management system that supports the organizations goals,
managers need to understand the process of employee performance.
2. Figure 16.4, Employee Performance as a Process, depicts the process of employee
performance.
3. The following guidelines describe how to make the performance management
system support organizational goals:
a. Define and measure performance in precise terms
b. Link performance measures to meeting customer needs
c. Measure and correct for the effect of situational constraints

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E. Compensation
1. Organizations can reinforce the impact of this kind of performance management by
linking compensation in part to performance measures.
2. Organizations can increase empowerment and job satisfaction by including
employees in decisions about compensation and by communicating the basis for
decisions about pay.
F. HRM Technology
1. Human resource departments can improve their own and their organizations
performance by appropriately using new technology. New technology usually
involves automation, that is, using equipment and information processing to perform
activities that had been performed by people.
2. Information technology provides ways to build and improve systems for knowledge
generation and sharing, as part of a learning organization.
3. HRM Applications: As computers become more powerful, new technologies
continue to be introduced. Some of the technologies that have been widely adopted
are transaction processing, decision support systems, and expert systems.
4. Transaction processing refers to computations and calculations involved in
reviewing and documenting HRM decisions and practices.
5. Decision support systems computer software systems designed to help managers
solve problems.
6. Expert systems computer systems that incorporate the decision rules used by
people who are considered to have expertise in a certain area.
7. In modern HR departments, transaction processing, decision support systems, and
expert systems often are part of a human resource information system.
8. Human Resource Information Systems: A standard feature of a modern HRIS is
the use of relational databases, which store data in separate files that can be linked
by common elements. The ability to locate and combine many categories of data has
a multitude of uses in human resource management.
9. Human Resource Management Online: E-HRM: During the last decade or so,
organizations have seen the advantages of sharing information in computer networks.
E-HRM can combine company-specific information on a secure intranet with links to
the resources on the broader Internet. A benefit of e-HRM is that employees can
help themselves to information they need when they need it instead of contacting an
HR staff person.

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10. Most administrative and information-gathering activities in human resource
management can be part of e-HRM.
11. Not only does e-HRM provide efficient ways to carry out human resource functions,
it also poses new challenges to employees and new issues for managers to address.
V. Effectiveness of Human Resource Management
1. In recent years, human resource management at some organizations has responded to the
desire for total quality management by taking a customer-oriented approach.
2. For an organizations human resource division, customers are the organization as a
whole and its other divisions.
3. Figure 16.5, Customer-Oriented Perspective of Human Resource Management,
examines the customer-oriented approach.
4. Depending on the situation, a number of techniques are available for measuring HRMs
effectiveness in meeting its customers needs. These techniques include reviewing a set of
key indicators, measuring the outcomes of specific HRM activity, and measuring
economic value of HRM programs.
A. Human Resource Management Audits
1. HRM audit a formal review of the outcomes of HRM functions.
2. To conduct the audit, the HR department identifies key functions and the key measures
of business performance and customer satisfaction that would indicate each function is
succeeding.
3. Table 16.3 lists examples of these measures for a variety of HRM functions such as
staffing, compensation, benefits, training, appraisal and development, and overall
effectiveness.
4. The audit may look at any other measure associated with successful management of
human resources such as compliance with equal employment opportunity laws,
succession planning, maintaining a safe workplace, and positive labor relations.
5. An HRM audit using customer satisfaction measures supports the customer-oriented
approach to human resource management.
6. After identifying performance measures for the HRM audit, the staff carries out the
audit by gathering information. The information for the key indicators is usually
available in the organizations documents.

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B. Analyzing the Effect of HRM Programs
1. Another way to measure HRM effectiveness is to analyze specific programs or
activities.
2. HRMs potential to affect employees well being and the organizations performance
make human resource management an exciting field.
3. The field of human resource management provides tremendous opportunity to future
researchers and managers who want to make a difference in many peoples lives.
Chapter Vocabulary
High-Performance Work Systems
Learning Organization
Continuous Learning
Transaction Processing
Decision Support Systems
Expert Systems
HRM Audit
Review and Discussion Questions
1.

What is a high-performance work system? What are its elements? Which of these
elements involve human resource management?
A high-performance work system is the combination of people, technology, and
organizational structure that makes full use of the organizations resources and
opportunities in achieving its goals. The elements of a high-performance work system
are organizational structure, task design, people, reward systems, and information
systems. These elements must work together in a smoothly functioning system. All of
the elements identified involve and are influenced by human resource management.

2.

As it has become clear that HRM can help create and maintain high-performance work
systems, it appears that organizations will need two kinds of human resource
professionals. One kind focuses on identifying how HRM can contribute to high
performance. The other kind develops expertise in particular HRM functions, such as
how to administer a benefits program that complies with legal requirements. Which
aspect of HRM is more interesting to you? Why?
The responses provided by the students will vary contingent upon their personal
viewpoints.

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3.

How can teamwork, empowerment, knowledge sharing, and job satisfaction contribute to
high performance?
Teamwork and empowerment can make work more satisfying and provide a means for
employees to improve quality and productivity. Jobs should be designed to foster
teamwork and employee empowerment. When all of the factors listed above are
combined, employees tend to have better satisfaction, which results in a high probability
of better performance.

4.

If an organization can win customers, employees, or investors through deception, why

would ethical behavior contribute to high performance?
The students answers to the question will vary depending upon their personal viewpoint
of ethics.

5.

How can an organization promote ethical behavior among its employees?

A number of organizational systems can promote ethical behavior. These include a
written code of ethics that the organization distributes to employees and expects them to
use in decision making. Publishing a list of ethical standards is not enough, however.
The organization should reinforce ethical behavior. The organization should provide
channels employees could use to ask questions about ethical behavior or to seek help if
they are expected to do something they believe is wrong. Organizations can provide
training in ethical decision making.

6.

Summarize how each of the following HR functions can contribute to high performance.
a. Job design
A possible response would be that this places employees in work teams where
employees collaborate to make decisions and solve problems.
b. Recruitment and selection
A possible response would be that this aims at obtaining the kinds of employees who
can thrive in a high-performance work setting.
c. Training and development
A possible response would be that this focuses on preparing employees to strive
forward in a high-performance atmosphere.
d. Performance management
A possible response would be that this reinforces the organizations goals and what
must be accomplished in order to meet those goals.

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e. Compensation
A possible response would be that this reinforces appropriate employee behaviors.
7.

How can HRM technology make a human resource department more productive? How
can technology improve the quality of HRM decisions?
Technology can improve the efficiency of the human resource management functions and
support knowledge sharing. HRM applications often involve transaction processing,
decision support systems, and expert systems. These can improve the efficiency of
routine tasks and the quality of decisions. Often, these applications are part of a human
resource information system using relational databases. With Internet technology,
organizations can use e-HRM to let all the organizations employees help themselves to
the HR information they need whenever they need it.

8.

Why should human resource departments measure their effectiveness? What are some
ways they can go about measuring effectiveness?
Taking a customer-oriented approach, HRM can improve quality by defining the internal
customers who use its services and determining whether it is meeting those customers
needs. One way to do this is with an HRM audit, a formal review of the outcomes of
HRM functions. The audit may look at any measure associated with successful
management of human resources. Audit information may come from the organizations
documents and surveys of customer satisfaction. Another way to measure HRM
effectiveness is to analyze the specific programs or activities. The analysis can measure
success in terms of whether a program met its objectives and whether it delivered value
in an economic sense, such as by leading to productivity improvements.

Business Week Case: From Devastation to High Performance

Case Summary:
This case study discusses how one organization learned from a devastating lesson and continued
on as a high performer.
Questions:
1.

In terms of human resource management, what do you think were the biggest challenges
facing Keefe, Bruyette, & Woods in the weeks after September 11, 2001? Will the focus
of HRM at the firm need to change in the future? Why or why not?
Student responses will vary. Possible responses may include: maintaining adequate
staffing, dealing with employees experiencing emotional trauma, and accessing
emergency employee benefits. This firm will need to maintain a detailed disaster plan to
demonstrate its preparedness in the future.

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2.

In the period described by the case, what elements of a high-performance work system do
you see? Which of the conditions that contribute to high performance are present?
Student responses may vary. Possible responses may include organizational structure,
task design, people, reward systems, and information systems. Incentives, knowledge,
and autonomy are conditions that may be identified as being present.

3.

Why do you think the firms people are worried that operating in crisis mode might be
the easy part? What can be easy about a crisis? What principles of highperformance organizations might help in this situation?
The student responses provided to this question will vary.

End of Chapter Case:

Case Summary: A Giant Falls
This case scenario examines the problems experienced at Arthur Andersen
Questions:
1.

What elements and conditions of a high-performance work system did Arthur Andersen
possess? Which did it lack?
Some elements and conditions Andersen possessed included organizational structure,
reward systems, and information systems. However, it lacked the right people and
perhaps ethical decision making capabilities.

2.

How would human resource management at Arthur Andersen have needed to change
when the firms goals shifted from an emphasis on independence and technical skill to an
emphasis on profit growth?
HRM would have to prepare the employees for the changes. Information regarding new
expectations and challenges should have been relayed to the affected employees.

3.

How could human resource management have promoted ethical behavior and affected the
course of events described in this case?
Human resource management could have provided a written code of ethics and
distributed it to the employees to use in their decision making. These ethical standards
could have been reinforced. Additionally, channels for communication regarding ethical
dilemmas could have been provided to the employees.

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Part V
Video Case
Workplace Ergonomics Is Good Business
Case Summary
In the past, injury at the workplace was common, but recently, due to new technologies in the
information age, industries of all types are changing with new injuries emerging. MSD, or
musculoskeletal disorders represent about one third of repetitive stress injuries, or 600,000,
which are serious enough to require time off the job according to the Occupational Safety and
Health Administration (OSHA). One of the most common MSDs in the workplace is carpal
tunnel syndrome, which affects the nerves of the hand. No one disputes these injuries, but it is
difficulty to scientifically prove the severity and complexity of the MSDs. Enter the new world
of ergonomics, the applied science of equipment design, intended to reduce operator fatigue and
discomfort. The question at hand now is whether or not OSHA, which is federally regulated,
should have provided guidelines for better ergonomic standards. There are various views on this
issue as seen in the video case from a variety of sources trying to answer the question posed
previously.
Questions
1.

Do you agree or disagree that ergonomics in the workplace should be covered by federal
regulations? Explain your answer.
Answer: Students may respond based on their own personal preference.

2.

Choose a job with which you are familiar and discuss the possibility for repetitive stress
injuries that could occur on this job and ways they could be prevented.
Answer: Students may respond in various ways. An example could be a data entry
position working 40 hours a week and as a result produced an MSD known as carpal
tunnel syndrome. Prevention steps can be as easy as purchasing a more ergonomic chair,
and wrists pads for the data entry personnel.
3. Imagine that you are the human resource manager for a company that hires workers for
the job selected in question 2. What steps might you encourage company officials to take
to identify and prevent potential MSDs?
Answer: Students may respond in various ways. An example of some steps implemented
could be periodically asking employees about the physical setting of the job. A survey is
a good tool used in the workforce that would ask employees the nature of their
environment, what could be changed, and what isnt satisfying them. Also, the employer
could make sure that all guideline provided by OSHA are met, with the proper ergonomic
setting in place for each position.