Infleunce of HRM Factors on Organisational Performance: Boeing in Reference - Iloka Benneth Chiemelie

          ABSTRACT

Purpose – To determine the factors of HRM that influences the performance of Boeing, and what kind of influence they have in the company.

Design / Methodology / Approach – Based on combination of literature research and in-depth interviews, the paper explore the main purpose of the research through knowledge-intensive service firms.

Findings – It was found that they are many factors that HRM practices that influences performance in the Boeing Company, and based on universalistic approach, this performance are positive, while based on contingency approach, the positivity of this influence depends on the factors of PMS.

Research Limitations/Implications – Future quantitative research could condense the general overview of this research, since influences of human resources practices in Boeing’s performance could depend on each branch according to our research.

Originality/Value – This paper is basically a combination of secondary researches done based on human resource management practices in a company the benefits of the practices. The researches where done on other companies and referenced in this paper to Boeing. Thus, makes this paper fill that part as void.

Keywords – The Boeing Company, HRM, Performance, Universalistic, Contingency, SPSS, Conventional business practices.

 Paper type – Research paper.

IMPORTANCE OF THE RESEARCHER PAPER

Human Resource Management offers critical understating of the workforce and helps in enhancing proper competitive environments. The importance of this research paper is explained based on different groups that it if of important to.

Researcher: this paper can be of importance to researchers in two basic ways. Firstly, it can serve as a foundation to further research. Through intensive researches, and citations as a prove of valid evidence, this paper can serve a guideline for researchers, towards developing a proper research pattern and objective. Secondly, it can serve as a root to further researches. This paper can help researchers to expand their work by understanding what has been done before and doing what is not contained in this paper or never been done before. Therefore, this paper could be an important tool to researchers.

Society: Human Resource Management is a social science that is why it this paper is of great importance to the society. As a social science, this paper can help in maintaining a more flexible workforce, conducive atmosphere for competition. it can help to regulate market and customer measure to ensure that  company’s and employers follow set rules and regulations which protect customers and employees rights.

Manager: this paper if of most importance to the managers since it helps in cost effectiveness management, gaining competitive advantage and product quality improvement. Through an extensive research, it has been revealed that human resource management practices are one of the most essential tools in organizational strategies. This paper contains the key steps and procedures organizations and manager can use to implement a strategic formula which is unique and surpasses that of their competitor towards gaining a competitive edge against other firms.

Other: apart from the society, managers and researchers, this paper could be of an importance to any reader who goes through it. This is because it is based on secondary research and empirical evidences which supports all ideas listed in the paper. It would improvement knowledge or increase skills among readers. This is a research paper, so it could serve as a guideline for students learn the procedures in doing a research paper as well as enhancing their reading habit and getting them acquainted with the day-to-day running within an organizational.

2.0 RESEARCH QUESTION

Fast environmental metamorphosis, globalization, competitions to be the market leader, changing customer and investor demands have become the standard “must do” for organization. To compete effectively, organizations must constantly and efficiently improve their performance by cost reduction, quality improvement and differentiating their products and services. This research examines the influence of HRM on the performance of Boeing.

Current researches have examined strategic human resources management (HRM) as a means of improving competitive advantage with the organization. Researchers have widely adopted this approach to firm’s strategy planning. The main assumption of HRM is that HRM practices influences organizations performance. This assumption is supported by recent empirical evidences (Arthur, 1994: Huselid, 1995; MacDuffie, 1995). However important questions remains including whether this practices of HRM generates positive or negative results. This questions lead to the development of the research question: to what extent does HRM practices influence performance in Boeing?

They have been debates on whether they are a standard way of Managing Human Resource. Some researchers proposed that such approach existed (Huselid and Becker, 1996; Pfeffer, 1998). Nevertheless, other researched suggested that effectiveness of Human Resource practices is dependent on organization type and environmental context (Mayer et al., 1993); Venkatraman, 1989). Accordingly, a better understanding of the impact of Human Resource Management can be achieved by further theoretical development and empirically researched evidence.

This research paper focuses on The Boeing Company. The Boeing Company is the largest global aircraft manufacturer by revenue, orders and deliveries, and the largest aerospace and defense contractor in the world. The Boeing Company founded by William E. Boeing in Seattle, Washington has expanded over the past 8 years and merged with McDonnell Douglas in 1997. The company generated US$ 60.91 billion in revenue in 2008 and is headquartered in Chicago, Illinois since 2001.

3.0 INTRODUCTION

3.1 PERFORMANCE OF THE SUBJECT

3.1.1 BOEING IN BRIEF – ORGANIZATIONAL PERFORMANCE AND GROWTH

Boeing is the world’s leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined. As a major provider to NASA, Boeing operates space shuttles and international space stations. Boeing has customers in more than 90 countries across the world and one of the largest U.S. exporters in terms of sales. Boeing has long tradition of aerospace leadership and innovation (Done and Hollinger, 2005). Through an efficient Human Resource practices, the company has continued to expand its product and service lines to meet emerging customer and investors needs. Boeing currently employs more than 158,000 staffs across US and in 70 countries across the world. More than 90,000 of Boeing staffs are college degree holders – including 29,000 advanced degrees – in virtually all business and technical fields from approximately 2,700 colleges and universities worldwide, representing a talented and innovative workforce worldwide (Done and Hollinger, 2005).

BOEING IN STOCK MARKET – ORGANIZATION PERFORMANCE AND GROWTH

Boeing financial fundamentals – sketch of their performance for 5 years

 Source – (Boeing Official Website) Edited in Microsoft PowerPoint. 

3.1.2 HUMAN RESOURCE MANAGEMENT IN BOEING COMPANY

Boeing Human Resource balances high tech with high touch. Boeing Human Resources provides the company’s employees with wide varieties of services and tools designed to support many life events and experiences (Berner, 1994). That a much advantage, the organization is doing this at a time when high attention is being paid to implement Learn + and doing more with less.

Organizations worldwide face increasing pressure to maintain combine conflicting priorities, such as attracting and retaining the nest-generation work force while managing the high cost of health care and other merit (Hessburg, 1998). For Boeing, the pressure to the pressure attract and retain new workers has never been this high. Today, 18 percent of the company’s employees are eligible to retire. With reference to Hessburg (1995), another 19 percent will be eligible in five years, and in 10 years, fully 60 percent of the current Boeing population will be eligible to retire.

Ultimately, Boeing is looking forward for their HR to provide benefits and services that will help in differentiating Boeing from other competing companies – in other words, to make Boeing an employee of choice (Knezevic, 1997). The main goal of these activities is to strengthen the company’s viability and competitiveness through great increase in market shares and productivity, as well as the creation of that supports a diverse inclusive and efficient work force (Johnson, 1993).

The Boeing human resource management department wants to make sure that they have best employees in Boeing, developing their employees and providing the right environments for their employees to be successful at all levels said Rick Stephen, senior vice president, Human Resource and Administration (Hopkins, 1995).

Sabbagh (1996) revealed that to the end, Boeing Human Resources has been evolving, finding a balance between a transaction and administrative – based business model and one of the personal attentions where HR professionals help guide employees.

Majority of the workers in Boeing rates Boeing as the best places they have ever worked and over 99 percent of Boeing staffs wish to retire in Boeing Company (Knezevic, 1998). Through strategic management, the human resource of Boeing have developed series of competitive advantages over their competitors and this makes them the world leader in aerospace industry in terms of revenue, orders and supplies (Poctor, 1995).

4.0 LITERATURE REVIEW

4.1 HUMAN RESOURCE MANAGEMENT PRACTICES

Despite the increasing researches on HRM, the term still remain unclear. Some researchers describe HRM as an outcome, others as a process and some as a combination of outcome and process. As an outcome, Wright and McMahan (1992) considered HRM as a structure of planned HR strategies and activities intended to help a firm to achieve its goals. It is an organizational lacuna designed to achieve sustainable competitive advantages through humans (Wright and Snell 1991). As a process, it is a ways of linking HR practices with business strategies (Ulrich and Lake, 1991). Considering both process and outcome combined, Truss and Grattton (1994) defined HRM as combination of HR functions with strategic goals and organizational objectives to enhance performance and build culture that facilitates innovation and flexibility in an organization.  However, in the absence of empirical definition, researchers highly argued that the standards features of HRM involves designing and using a set of internally conventional process and practices to ensure that firm’s human capital, helps in achieving business objectives (Gratton and Hope-Hailey, 1999; Jackson and Schuler, 1995).

The extent to which HRM may be considered a strategy is measured by the various factors involved. This research summarizes these factors based researchers views. As first, Welbourne and Cyr (1999) suggested, HR professionals play important roles in strategy formulation since they build policies and steps to match the business strategy, and thus has a direct influence on the development of the business strategy.  Additionally, they may critically enhance departmental abilities to implement HR practices. Secondly, strategically influencing firm performance needs a combination of the HR system (internal factors) with the operating and strategic desires (external factors). This alignment establishes relationship between HRM planning and other functions. Finally, the specific and standard requirements of HM planning and the degree of line manager involvement in HRM activities (Huang, 1998) are potential influences on SHRM deployment.

Based on theses broad arguments on the centralized features of HRM and the determinants of HRM as strategic, this research defined HRM as the extent of involvement in core decision-making and partnership played by HRM departments, and specific strategies that HRM department require in planning and building, all strategies that ensures achievement by human capital in organizations goals.

Recent theoretical research works on business strategy have proven that HR practices can help in developing a firm’s competitive advantage. According to a resource from Barney, (1989) suggested that firms could build stained competitive edge through creating value in manner that is scarce and difficult for competitors to imitate. Conventional sources of competitive advantage, for instance, resources, technology and economics of scale have become easy to imitate. The concept of HR practices as a strategic asset has implications for the above idea. HR is an invisible asset that generates value when it is adopted in the operational system in a way that enhances firm ability to deal with fragile environment.

4.2 ORGANIZATIONAL PERFORMANCE

Companies worldwide, compete in an open and global market where survival and success depends on distinctive internal capabilities rather than on advantage derived from market failure and imperfections. Referencing from the initial world of Skimer (1969), may authors have argues that organizational performance can play a major roles in the market scenario, stating that performance has the power to support and sustain business strategy and to build competitive advantages (Hayes and Wheelwright, 1984; Cleveland et al., 1989; Slack, 1995).

In recent years, several innovative and promising practices and policies related to the performance function have rapidly become popular as they have been considered key for organizational development and growth of some countries. Concepts, such as partnership sourcing, employee empowerment, just-in-time production and total quality management have become famous and are considered advanced in many organizations as powerful tools for managing operations.

The performance of an organization is the level of output which they provide effectively and efficiently. A positive performance in an organization is mainly influenced by the quality of leadership and politics in the organization. Leadership is considered as a factor that influences performance of organizations, managers, and employees (Wang et al., 2005).  Researchers have revealed that organizational leadership and politics can have positive or negative antecedent on organizational performance (Adams et al., 2002; Allen et al., 1979; Bass, 1985; Burns, 1978; Ferris and Kacmar, 1992; Gandz and Murray, 1980; Kacmar and Baron, 1999; Madison et al., 1980) a positive performance occurs when organizations achieve their goals and failure to achieve this goals result in a negative performance O’Connor and Morrison, 2001; Parker et al, 1995; Valle and Perrewe, 2000).

Organizational performance can therefore, by defined in this paper as the way firms achieve their goals which results from effectiveness, efficiency, relevance and financial viability. Every organization has their own performance standards which they set to ensure quality in their production and have a competitive edge against their competitors. This performance measures are mainly based on organization size, resource and environmental context.

To improve organization’s performance and create competitive advantage, organization HR must focus on a new set of priorities. The new priorities are better business and strategic orientation and less conventional business practices orientation such as staffing, training, appraisal and compensation. Strategic priorities include team-based job design, workforce flexibility, quality management practices, employee empowerment and inventive compensation. Performance diagnoses firm’s strategic needs and planned innovation which is required to implement competitive edge and achieve operational goals (Huselid et al., 1997).

4.3 INFLUENCE OF HRM IN ORGANIZATION’S PERFORMANCE

Numerous researchers have argued that HRM has two positive effects of universality and contingency. Universalistic researchers argued that many HR practices are consistently better than conventional practices. It is claimed that organizations, not withstanding size, industry, or business strategy, should always adopt the universalistic strategy (Arthur, 1994; Delery and Dotty, 1996).

However, whether strategic human resources management should always be positively related to firm’s performance remains unclear. Contingency scholars argued that the assumption underlying the strategy-performance link are possible only in high external fit condition, otherwise known as the best fit (Bamberger and Meshoulam, 2000; Boxall and Purcell, 2000). Thus, the hypotheses were developed following these understandings.

H1. Flexibility in HRM practices probably influences organizational performance positively (Martell and Carroll, 1995).

Strategic human resource management helps in improving Organization’s human resources cost benefits, enhancing operational efficiency, increase innovation and revolution strengths, and increase organizational performance benefits (Dyer, 1983). The Boeing human resource management enhances employment security, selective hiring, self-managed team, high pay company contingency performance, extensive training programs, reduction of status differences and information availability between workers (Pfeffer, 1994). Besides, Cook and Ferris (1986) asserted that HRM is an efficient function that helps Boeing copes with changes in the environment. Boeing directly and indirectly benefits from HRM because it transforms positivity into initiative, transmits organizational goals efficiently and encourages line-managers involvement in decision making process (Gomez-Mejia et al., 1995). Welbourne and Andrews (1996) argued from population ecology that HRM positively influences Boeing’s performance because it generates structural cohesion, an employee generated structure that powers Boeing forward, and enabling Boeing to respond to its environment while still moving forward.

Numerous researchers have found out that strategic implementation of HR in high productive companies differed from that off low productive companies (Misa and Stein, 1983). Cook and Ferris (1986) researched on HRM practices in declining industries, and they found out that most high performing firms adopted HRM measure, while low productive companies employed conventional business practices. In a more recent research, Huselid (1993) found a positive relationship between HRM practices and firm financial performance.

H2. Control orientation of HRM practices, influences organizational performance positively (Ventkatraman, 1989).

Contrasting with universalistic thinking, it is argued that human resources strategies will be more effective in an organization only when appropriately performed in a specific organization and within a given environmental context. Additionally, contingency approach is more complex that universalistic argument because they imply interaction rather than the linear relationship involved in universalistic perspective (Ventkatraman, 1989). How HRM influences a company is based on the organizations internal and external fit. By internal and external fit, the idea means the environment within which the organization operates. Researchers have focused the on the fit between strategy and other factors, including that between company strategies and required role of employees (Schuler, 1989).

Pfefer and Salancik (1979) found out that Boeings environmental characteristics have a significant influence on the company’s performance, since external environment represents customer demand and competitors which are important factors of organization’s performance.

From Schuler and Jackson (1987) cost reduction, quality management and innovation are the three types of product management strategy Boeing uses to build competitive advantage over their competitors with the help of the human resources department. The cost reduction involves strategies by Boeing to produce goods and services cheaper than competitors, which involves efficient production scale, minimizing expenses and supplying standards for reducing cost. The quality management strategy refers to the production and delivery of high quality airplanes and jets across the world, which is why they are currently the world largest aerospace company. The innovation strategy includes production of complex and evolving products that differs from their competitors (Miler, 1986).

This research thus predicts, that when Boeing adopts different product management, such as cost-reduction strategy, quality enhancement strategy or innovation strategy, then implementing HRM does not always influences organizations performance positively. For instance, when Boeing adopt an innovation strategy, they might benefit more from implementing HRM than their competitors who adopt other strategies, because HRM facilitated cooperative, interdependent and long-term characteristics. HRM also increase the exchange of ideas and risk taking, which are critical elements for new product development in organizations (Schuler, 1989). Based on the above discussion, the second hypothesis this is proposed:

H3. Internal and external orientation of HRM practices is expected to have an influence in organizational performance, and organizations with organizations with high HRM practices are expected to have a better overall firm performance compared to those with a lower orientation (Hart and Quin, 1993; Denison and Mishra, 1995; Yeung et al., 1991).

A positive relationship was found between organization and human resource management practices by Hart and Quinn (1993) in their study of leadership role. This was further confirmed by more studies that show positive influence of HRM practices in organization’s performance by Cameron and Freeman (1991) and Gonzalez-Roma et al., (1996). As for researchers using the framework, some view internal focus of an organization as having a negative impact on the performance (Wright et al., 1991), while others belief that stability internal focus culture can influence organization performance positively (Denison and Mishra, 1995). Denison and Mishra (1995) also noted that organizational culture that is marked by flexibility, adaptability and external focus positively influences organizational performance. Further research revealed that, organizations that deploy all four models of HRM practices have a better positive influence on their performance those organizations that don’t (Denison and Preitzer, 1991; Yeung et al., 1991). These four models are described based on three HRM variable: HRM practices, HR skill and HR behavior (Wright and Sherman, 1991; Wright and Snell, 1998)

5.0 ANALYSIS

H1. Flexibility in HRM practices probably influences organizational performance positively (Martell and Carroll, 1995)

Flexibility can be seen as “easy to change” and significant researches have suggested that flexible HRM practices helps organizations to obtain competitive advantages and improve performance (Huselid, 1995; Fritis and MacDuffie, 1996; Guest, 1997; Michie and Sheehan, 2001; Ahmad and Schroeder, 2003; Guest et al, 2003). These flexible HRM practices has be termed by different author as: “best HRM practices” (Pfeffer, 1994), “quality performance work system” (Appelbaum and Batt, 1994) and “high investment practices” (Lawler, 1986). These terms expresses the importance of HRM practices in positively improving organizational performance (Boxall and Purcell, 2003). Irrespective of the terms given to these HRM practices, it is worth nothing that a positive result is associated in most cases (Guest et al., 2003).

The main idea around flexible HRM practices is that a particular set of HRM practices has the potentials of bringing about a positive result in an organizational performance for all organizations (Marchinton and Wilkinson, 2003). Therefore all firms should implement HRM practices in their quest to improve performance. Soliman and Spooner (2000) argued that there is a major role played by HRM practices in facilitating absorption, transfer, creation and sharing of knowledge in an organization which impact the performance of the organization positively.

Nevertheless, as Delaney and Huselid (1996) argue, there is still no clear understanding of how HRM practices influences organizational performance positively, and this idea was supported by many researchers that pointed out that there is a lack of understanding about the how and why HRM creates positive improvement in organizational performance (Becker and Gerhart, 1996; Wright and Sherman, 1999; McMahan et al., Delery and Shaw, 2001). This is the main reason behind the introduction of a probability on the influence of HRM practices in organizations from the first hypothesis. For Sveiby and Simsons (2002, p.4) the idea is that there is that knowledge is not a discrete object which makes it difficult to transfer the immediate context and it can result to a negative outcome within an organization by allowing other organizations to gain competitive edge against them.

H2. Control orientation of HRM practices, probably influences organizational performance positively (Ventkatraman, 1989).

In accordance with contingency theories (Miles and Snow, 1984; Porter, 1985; Schular and Jackson, 1987), in other to improve organizational performance through HRM practices, it must be combined with specific control measures. For example, firms that use a cost-reduction strategy have to rigorously monitor and minimize expenses, while striving for higher economies of scale because efficiency is an important tool for firm’s survival (Ventkatraman, 1989). Through transformation process routine, business predictability is increased by control of behavior, and this business practices includes: standard operating measures, behavioral performance appraisal, supervision, and feedback, and this increases business reliability and organizational efficiency.

Firms focusing on innovation strategy must adapt a rapid market change and technological improvement. Employees of these firms, need to be creative, cooperative, task orientated and devote adequate consideration towards quality and quantity management of products and services produced: able to take risk and successfully cope with ambiguous and uncertain tasks (Huang, 2001). Through a well implemented control measure from the management, firms performance would be positively influenced (Snell and Youndt, 1995).

Firms using quality-management measures will have to make frequent changes in the production procedures in order to upgrade product quality continuously. This strategy demands a high level of employee involvement in order to offer superior quality products and services compared to their competitors. Since quality is a highly crystallized object, information about result tends to be highly available when using output control measures, this makes it easy for subordinates to implement great deal of performance measures and make adjustment without the intervention of supervisors. Based on the ides of a one-dimensional utility practices, a crystallized standard refers to the chase for a singularly valued performance output.  There is clear evidence that output and quality management control tends to be used when standards of desirability are crystallized (Hofstede, 1978; Ouchi, 1978) and this can positively influence organization’s performance through constant improvement of product and service quality.

Nevertheless, low implementation of these control measures can result in an undesirable outcome, which could influence organization’s performance negatively (Ward and Duray, 2000). 

H3. Internal and external orientation of HRM practices is expected to have an influence in organizational performance, and organizations with organizations with high HRM practices are expected to have a better overall firm performance compared to those with a lower orientation (Hart and Quin, 1993; Denison and Mishra, 1995; Yeung et al., 1991).

The “fit” concept has been central in the field of strategic management, which has lead to the focus on the fit between strategy and other constructs, including organizational strategy and role behavior of employees (Schuler, 1989), business strategy and HRM practices, strategy and business life cycle, strategy and HRM practices (Schuler, 1989), and strategy and organizational culture (Goll and Sambharya, 1995).

In HRM practices, internal and external fit are the two main research streams. Scholars have long held that, that internal and external fits, significantly influences organization performance (Pfeffer and Salancik, 1978), since this fits represents important determinants of organization’s performances such as customer demand, competition and market size.

This internal and external fit probably influences organizations performance. Beaumont (1993) stressed that HRM practices is a better approach towards modern business, and that conventional business practices of the traditional HR functions don’t adequately responds to fundamental environmental changes, with particular reference to product market condition (Schuler, 1989). This lead to the conclusion that firms that adopt two or more HRM practices might benefit more from the implementation than firms that adopt lesser models (Orlando and Jonson, 2004).

MacDuffie (1995), found no evidence to prove that there fit between appropriate human HRM practices influenced organization’s performance positively this is similar to the idea by Bird and Beechler (1995) that the number of HRM models implemented by an organizational is not a guarantee to positive performance, but that positive performance from HRM practices results from strategic management within the organization and market it operates in.

6.0 CONCLUSION AND RECOMMENDATION

This research paper examined the impact of HRM on the performance of Boeing. The findings or this research paper does not support the universal believe, suggesting that HRM is the best practices and a source of sustainable competitive advantages in any context. In contrast, this study supported the contingency perspective which indicates that a factor between HRM and product management strategy contributes to firm performance. Additionally, most previous studies on Boeing, this paper examined the data from 100 Boeing firms out of a possible 150 worldwide (Bae and Lawler, 2000). Consequently, the result further confirmed the validity of the contingency model in Boeing companies worldwide.

7.0 LIMITATIONS

This research paper obtained valuable results; however, they are several limitations that have to be discussed. The first potential problem is based on the respondent judgment. Though Dess and Robinson (1984) suggested that subjective data can be used where objective data were unreliable, researchers could consider using secondary data such as complimentary information to achieve more reliability in the future.

Secondly, a limited number of items were measured for each variable. In future research, more items could be added to increase the validity of variable components such. This would increase reliability and help in developing more hypothesis.

Finally, for organizational politics can change the view of this paper, since different manager have their own management methods.  In an undemocratic workforce, employees’ dissatisfaction could impact the way HRM influences performance within an organization.

8.0 FUTURE DIRECTION

From the HRM typology of Wright and Boswell (2002), which includes HRM practices and levels of analysis, this research paper focused on how HRM practices influences performance in Boeing Company? Future studies could focus on a particular HRM practices and how it includes the Boeing Company. For example, how commission and regards influences workers loyalty and motivation in Boeing Company.

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