Key to businesses surviving the pandemic

Businesses everywhere are being severely impacted by the current pandemic. However, researchers say that some businesses will fare better than others – and that’s all dependent on their type of human resource management system.

Researchers from the University of South Australia, the University of Melbourne and RMIT say that those that encourage participative, motivation practices will recover more quickly than those that emphasise financial incentives.

Layoffs are a dire reality, occurring recently across many industries including travel, hospitality, entertainment and retail, as well as professional services.

“In recent weeks we’ve seen many organisations tighten their belts to stay afloat, with some resorting to layoffs in the hope that a ‘leaner and meaner’ structure will help them retain or restore a competitive edge,” says Professor Carol Kulik, a researcher at UniSA.

“But the challenge is, the success of a layoff depends on the surviving staff, who inevitably must work harder as the workforce shrinks and, as a result, organisational performance drops.

“Our research shows that businesses with strategic HRM systems focussed on participation and collaborative communication practices are far stronger in times of adversity. This is because the nature of these HRM practices have developed a culture of trust.”

However on the other hand, organisations that place a large emphasis on financial incentives, such as pay performance, create a culture of risk.

“Here, businesses align workers’ financial interests with those of the company, encouraging employers to ‘take a risk’ that their investment (in working hard) will pay off and they will share the company’s profits.

“Layoffs in these situations tell employees that their risks will not pay off, so when incentives drop, so too does performance.”

Studies have shown:

WERS data from five years ago, involved 745 workplaces. The team used cluster analysis to identify workplaces with high-performance workplace systems (HPWS); systems that used integrated HRM practices such as rigorous selection, training and teamwork to motivate and maintain high performance; and regression analyses to compare the performance effects of different employment systems.

Researchers found that 60% of workplaces had HPWS and that these outperformed businesses with less-strategic HRM practices.

Additionally, it highlighted the benefit of collaborative HRM practices as opposed to financially driven HRM practices.

“High-performance workplace systems send clear messages to employees about what the employer values, motivating employees to focus on those particular parts of their performance, so these produced higher performance than those without such clarity,” explains Professor Kulik.

This research was published in the Human Resource Management Journal, this week.