Employee Management and Organizational Performance

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Definition of HRM

Human resource management (HRM) is a broad concept that focuses on developing human capital for the attainment of organizational objectives. Kleynhans (2006) uses a different analogy to explain the concept by saying it involves valuing people at work and developing their talent. Many organizations have adopted the HRM concept as a replacement for the outdated concept of personnel management (Currie & Kerrin 2010). Its strategic functions appear below

Strategic Functions of HRM

Rewards Management

HRM ensures that employees get fair compensation for their work. They do so by developing a compensation and benefits structure that accommodates the interests of employers and employees. Compensation may be in the form of awards, recognition, or gifts (Brand Finance 2016).

Training and Development

The strategic role of HRM in training new employees is to prepare them for new responsibilities in the organization. Succession planning and promotion are some processes that depend on this key strategic HRM function (The Hong Kong Management Association 2015). Effective employee training helps to improve employee motivation and reduce employee turnover.


According to AON (2016), recruitment and selection are an integration of HRM’s employee relations and recruitment functions. Nonetheless, this HRM function involves finding the right employees for the right positions in the organization.

Employee Relations

Broadly, the employee relation function refers to the elimination of conflict between employers and employees. In this context, employees are assets to employers and, although there may be differences between them, HRM helps to minimize disagreements by formulating effective procedures and relationships (Universum 2016).

Knowledge Management

HRM influences knowledge management on the premise that most organizations thrive on knowledge sharing among employees. This finding means that knowledge management is not simply about capturing explicit knowledge through modern information technology tools, but also about using the same knowledge to create competitive advantages. This fact stems from studies that have shown that organizational learning is a critical process in the development of competitive advantages (knowledge management is at the center of organizational learning) (Currie & Kerrin 2010).

Performance Management

HRM ensures that employees are motivated and perform optimally by removing any barrier to performance. This is an important function of HRM, which ensures the effective use of human labor. Nonetheless, the performance management function is often subject to the excellent management of all other HRM functions mentioned in this report.

This paper delves deeper into understanding the roles of HRM in organizational performance. To get a deeper understanding of this area of study, this paper focuses on two aspects of organizational management to explain the functions of HRM – knowledge management and employee relations. The structure of this paper first explains employee relations and its relationship with HRM and later investigates knowledge management as another HRM function. We use the case study of the Harrods Company to explain the strategic function of HRM in these two functional areas.

Employee Relations

There is little debate about the importance of happy employees in an organization (Gennard & Judge 2005). Indeed, no business can effectively achieve its goals without the input of its employees. A 2009 report by McLeod, titled, Engaging for Success (cited in Purvin & Arbuckle 2009), highlighted this fact by emphasizing the importance of involving employees in different levels of management. Researchers refer to this involvement as employee engagement and participation (Currie & Kerrin 2010). In this paper, we will refer to this concept as employee relations. This analysis provides a framework for understanding how HRM contributes to organizational performance by improving employee relations. Subsequent sections of this paper provide evidence of how HRM does so.

Negotiating Employee Agreements

Human resource (HR) managers help to negotiate agreements between employers and employees. To do so, they often make sure they understand relevant awards and legal requirements of such agreements (Gennard & Judge 2005). They also make sure all employee representatives have available information regarding such negotiations (Currie & Kerrin 2010). Blyton and Turnbull (2004) also say they must keep an open mind and have a “big picture” of what the organization could achieve by properly negotiating agreements between employers and employees. Lastly, they lodge agreements between the two parties to make them legally binding. These insights show that HR managers help organizations to formulate work agreements. Amicable agreements often lead to improved employee relationships and improved organizational performance (Gennard & Judge 2005).

Solving Disputes and Conflicts

Employers and employees often have disagreements, especially when there are unclear agreements between them. HR managers are often equipped to resolve such conflicts (usually in the context of enterprise resource agreements) (AON 2016). In this regard, human resource personnel act as mediators between the two parties. Therefore, they usually have the interests of both the employers and employees in mind. This function aligns with the above-mentioned function (negotiating employee agreements) because dispute resolution processes often lead to agreements between employers and employees (Blyton & Turnbull 2004).

Training other Managers and Supervisors

One key responsibility of HR managers is to train lower-level managers and supervisors about the best practices to adopt in fostering employer-employee relations (AON 2016). For example, managers should have a proper understanding of the agreements signed between employers and employees to facilitate their effective implementation. HR managers must act as the go-between for the lower-level managers and the company’s top management team. Currie and Kerrin (2010) say monitoring the performance of lower-level managers and supervisors using appropriate performance indicators is the right approach for tracking changes in workflow processes that would affect employee relations. In this regard, HRM plays an important function in training managers and supervisors about the need to improve employee relations. Holistically, the case study below demonstrates how HRM improves employee relations.

Case Study

Harrods is among the world’s largest department store that sells men and women’s designer goods. Its key products include luxury gifts, food, and accessories. According to Purvin and Arbuckle (2009), the company’s brand values are British, luxury, service, sensation, and innovation. For a long time, the company’s employees have played an integral role in upholding these values. For example, being a retail company, its employees are the face of the organization because they interact with different types of customers and are primarily involved in the daily running of the business (Purvin & Arbuckle 2009). However, in 2009, the company suffered dwindling financial fortunes because of problems in employee relations.

What was the Problem?

Being in business for more than 160 years and having a global presence in different parts of the world, Harrods employs more than 4,000 employees (Purvin & Arbuckle 2009). However, in 2009, the company suffered from a high employee turnover rate because of disgruntled workers. The company incurred high recruitment costs, suffered from loss of expertise, and incurred increased training costs because of this problem. Consequently, the company’s management had to investigate the cause of the problem.

What did the Company do?

When faced with the issue of high employee turnover, the managers of Harrods company decided to survey to gather employee opinions regarding their work experiences at the company (from this effort, employee surveys have become a permanent fixture in the organization’s HRM practice). The outcome of this process showed that the company’s management was performing poorly in terms of fostering employee engagement and trust. Key findings of the study pointed to four critical areas of HRM performance that needed change.

A change of organizational Structure

The survey revealed that the organization had a hierarchical structure that locked out most employees from participating in the decision-making process (Purvin & Arbuckle 2009). Thus, there was a need to change this structure and allow more employees to take up more responsibilities in the organization. The company intended to foster job enrichment and job satisfaction by changing this situation.

A Change of Leadership

The survey revealed a need for leaders to create an environment for employees to participate in the decision-making process. Here, employees wanted the leaders to formulate the organization’s vision, but allow them to take up leadership opportunities during the implementation phase (Purvin & Arbuckle 2009). These sentiments manifested as a quest for transformational leadership in the organization.

A Change of Communication

Employees wanted a better communication framework that made them aware of the company’s strategies. Through this framework, they wanted to know about the organization’s daily operational processes, which would have a direct effect on their jobs. The changes also included a bottom-up communication structure where employees informed managers about their views as well.

Living the Brand Values

The employees wanted the company to tailor its processes to appeal to the company’s brand values to achieve proper synchrony in their organizational functions.

What were the Results?

The findings of the study provided a framework for formulating Harrods’s strategic plan to address the high employee turnover problem. The company’s managers decided to positively change the organization’s culture and make it appealing to the employees, while at the same time making sure the company’s brand remained uncompromised. They did so by developing a people-focused culture for improving employer-employee relations. Today, the culture created from this process has become part of the organization’s DNA, as most of its processes revolve around the improvement of employee relations (Purvin & Arbuckle 2009).

Comprehensively, the findings highlighted in this case study show that employees do not operate in a vacuum; they need to communicate with each other and more importantly, with their employers. In this regard, employers need to maintain a sound relationship with their employees to make sure that the organization runs smoothly. The role of HRM in boosting employee relations stems from this fact – the ability to maintain a sound working relationship between employers and employees (Blyton & Turnbull 2004).

Knowledge management

Researchers have historically defined and debated the concept of knowledge management in different analytical spaces (Blyton & Turnbull 2004). Other researchers have defined it through the prism of competitive advantage by saying it is a tool for organizations to leverage their intellectual capital, over other organizations, to gain a competitive advantage (Currie & Kerrin 2010; Maier 2013). To understand how successful HRM contributes to organizational performance through knowledge management, we have to understand that generic knowledge management behaviors stem from the four tasks of effective HRM.

These tasks include identifying behaviors needed for knowledge-based competition, ensuring an organization has the required competencies, ensuring employees are motivated enough to engage in important organizational behaviors and creating opportunities for the workforce to behave as needed (Althoff 2005). These HRM tasks lead to the realization of different components of the HRM system, which include work design (work roles and careers), staffing (recruitment, selection, release), performance measurement (of individuals and groups, or teams), training and development, rewards, and organizational cultures (Althoff 2005).

Generally, these components of the HRM system outline the framework for accomplishing the four HRM tasks outlined above. When undertaking these tasks within these frameworks, we come up with generic knowledge management behaviors that include acquisition of knowledge, creation of knowledge, sharing of knowledge, application of knowledge, and knowledge updates (Currie & Kerrin 2010). Collectively, the interactions outlined here lead to the effectiveness of individual teams and work units.

Some researchers point out that the relationship between knowledge management and HRM is not one-sided, as knowledge management plays a significant role in the development of HRM (Althoff 2005). To understand this statement, Currie and Kerrin (2010) say it is important to understand the different perspectives we can use to assess knowledge management. From a business perspective, knowledge management has two main meanings.

The first one is treating the concept as an explicit component of business strategy, policy, and practice (Althoff 2005). In the same breadth of analysis, knowledge management helps businesses to make a connection between their intellectual assets (both implicit and explicit) to achieve positive business results. The second meaning of knowledge management to business processes stems from its collaborative and integrative role. Some of the functions help organizations capture and use an organization’s intellectual assets well (Universum 2016). Subsequent sections of this report show key areas where HRM helps in knowledge management to improve organizational performance.

Articulating the Purpose of Knowledge Management

Undertaking knowledge management processes in an organization without articulating its purpose is a useless undertaking if managers do not understand the purpose of knowledge management in the first place. Many organizations make this mistake by investing many resources in acquiring new technologies to solve problems that they have not defined in the first place (Maier 2013). After understanding the problem, such organizations find it difficult to abandon the solution they thought would work because they probably do not have the resources to invest in the right solution.

Here, Brand Finance (2016) suggests that all organizations need to understand how to get the right information to the right people and at the right time. Although many organizations have the opportunity to use organizational learning processes to improve their key competencies, few of them do so successfully. Relative to this assertion, Althoff (2005) adds that organizational knowledge and knowledge management are both interrelated concepts that mostly rely on HRM for their success. In this regard, HRM helps companies to develop the capacity to manage their intellectual capital. To do so, HRM helps organizations to get the right knowledge to the right people and at the right time so that they could leverage it and gain a competitive advantage, or accomplish a specific task (Universum 2016).

Alignment of Organizational Goals and Objectives

HRM helps organizations to align their knowledge management process with organizational goals. To explain this fact, Althoff (2005) emphasizes the importance of organizations to frame their knowledge management processes before formulating a solution to manage problems. In the same regard, organizations need to understand how their knowledge management processes align with organizational objectives and processes. HRM helps them to do so because it understands organizational goals and knowledge management goals.

Creating Ultimate Employee Experiences

Many researchers agree that HRM could improve knowledge management processes in organizations by creating an ultimate employee experience for its workers (The Hong Kong Management Association 2015). Transforming tacit knowledge into explicit knowledge is one way of doing so. Organizations could also do so through education, building employee competencies and careers through training and development. This process combines the traditional training goals associated with HR functions and the modern responsibilities of HRM. The same process also involves using an organization’s resources to create a strategic capability within an organization.

Disney is one organization that has effectively created the ultimate employee experience by merging its HRM functions and knowledge management functions (Brand Finance 2016). It has done so through a staff orientation process that merges the organization’s mission and values with employee experiences. The benefits that Disney World’s employees have gained from the magic kingdom experience (which made tacit knowledge more visible to the employees) are evidence of this fact. The case study below shows a holistic understanding of how HRM could improve knowledge management processes

Case Study

About the Organization

Harrods has a vibrant knowledge management system that integrates its global and virtual operations (Purvin & Arbuckle 2009). However, this has not always been the case. This case study reveals how the company used HRM to make its knowledge management system the success it is today.

What was the problem?

For a long time, Harrods has had a data management problem, which stemmed from inconsistencies that arose from its data management process (Purvin & Arbuckle 2009). The department store failed to have a consistent data management protocol for all its branches and cost centers. It also lacked a common protocol for maintaining ledgers across its different business units.

What did the HR Department do?

The HRM department was responsible for improving the organization’s knowledge management systems and recommended the introduction of a data repository center to undertake all information system functions. It hoped to create a system where changes in one data center would reflect in all business systems. This measure ensured the organization had a standard change control process that reduced the chances of error. Departmental managers were better equipped to detect errors and correct them in this system. It allowed them to manage data assessment issues before other branches in the organization could misread or misinterpret them and cause operational problems in the company. The HRM department consulted with a third-party organization to help it complete this function.

What was the Outcome?

Different departments that were part of the knowledge management process had a better workflow from the interventions of the HR department. Overall, there was improved data consistency from the formalized knowledge management structure. Independent reports also showed an improved data quality of more than 90% (Purvin & Arbuckle 2009). This outcome stemmed from an improved cleansing of source data and a reduced number of duplicate records. From the contributions of the HR department, Harrods also realized improved accuracy in regulatory reports, thereby improving its transparency and governance processes. Today, stemming from improvements in the knowledge management process, the company’s managers have an improved understanding of the organization’s global operations (Purvin & Arbuckle 2009).


This paper has shown that HRM plays a critical role in improving different tenets of organizational performance. However, the findings of this study have only demonstrated how it improves knowledge management processes and enhances employer-employee relationships. The case Harrods case study has also portrayed real-life examples of how HRM could help to improve these two functional areas of organizational productivity.

Comprehensively, we find that the critical functions of HRM in boosting employer-employee relations are negotiating agreements between the two parties, solving conflicts between employers and employees, and training managers and supervisors to undertake organizational activities that align with the company’s goal of boosting employee relationships. In the context of knowledge management, we have also found that HRM helps organizations to articulate the functions of knowledge management, align organizational goals and objectives with knowledge management functions, and create the ultimate employee experience by transforming tacit knowledge into explicit knowledge. Generally, the insights highlighted in this paper demonstrate the functions of HRM in knowledge management and the improvement of employee relations.


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Blyton, P, & Turnbull, P 2004, The Dynamics of Employee Relations, Palgrave Macmillan, London. Web.

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Currie, G, & Kerrin, M 2010, ‘Human resource management and knowledge management: enhancing knowledge sharing in a pharmaceutical company’, The International Journal of Human Resource Management, vol. no. 6, pp. 1027-1045. Web.

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