The importance of the human resources management (HRM) to the success or failure of health system performance has, until recently, been generally overlooked. Health sector reform in many countries in the 1990s focused on structural change, cost containment, the introduction of market mechanisms and consumer choice [1, 2] but with little direct attempt to address HR aspects.
In recent years it has been increasingly recognized that getting HR policy and management "right" has to be at the core of any sustainable solution to health system performance [3, 4]. This is partly a result of the need to upscale capacity in many country health systems to meet the Millennium Development Goals. A well-motivated and appropriately skilled and deployed workforce is crucial to the success of health system delivery. The actual methods used to manage human resources in health care may in themselves be a major constraint or facilitator in achieving the objectives of health sector reform [5, 6].
In comparison to the evidence base on health care reform-related issues of health system finance and appropriate purchaser/provider incentive structures, there is very limited information on the HRM dimension or its impact [7]. There is a limited, but growing, evidence base on the impact of HRM on organisational performance in other sectors, but there have been relatively few attempts to assess the implications of this evidence for the health sector. This paper examines this broader evidence base on HRM in other sectors and examines some of the underlying issues related to "good" HRM in the health sector.
"Good practice" in human resource management
In order to place the evidence base on HRM in health care in context, this section considers how "good practice" in human resource management (HRM) has been defined and evaluated in other sectors. Essentially there are two sub-themes: how have HRM interventions been defined? and how have the effects of these interventions been measured in order to identify which interventions are most effective? In other words, what is "good" HRM?
A review of English-language publications highlights that there is a growing evidence base on these issues. Much of it focuses on organizational-level studies using large-dataset analysis to examine the relationship between HR interventions and measures of organisational performance and output, where the latter are defined in terms of private sector "business" success – profits, returns on sales, etc. As well as single-study publications, there have also been some published reviews. These reviews are discussed first.
One recent multisector review of research on the relationship between HRM and organisational performance reported that "more than 30 studies carried out in the UK and US since the early 1990s leave no room to doubt that there is a correlation between people management and business performance, that the relationship is positive, and that it is cumulative: the more and the more effective the practices, the better the result" [8] (see also [9]).
A similar, if more qualified, finding had been reported by Richardson and Thompson [10], who had noted: "There are in the region of 30 empirical studies that have sought to address the relationship between HR practices and business performance … The published research generally reports positive statistical relationships between the greater adoption of HR practices and business performance" [10].
The key lesson from these reviews is that investment in developing and maintaining effective HRM policy and practice can make a significant and measurable positive contribution to organisational performance (see also [11]). A more detailed examination of some of the key texts in this area gives some general support for this view, but also pinpoints some of the limitations, particularly if the results are to be considered from a health systems perspective.
One sector-specific issue has to be considered when looking at the implications of the current evidence base for HRM practice in the health care sector. Almost all the mainstream general research on HRM and organisational performance assessed in the reviews highlighted above focuses on private-sector business corporations. Much of it relies on measures of organisational performance (e.g. profits and return on sales) that cannot readily be applied to a public sector health system.
Richardson and Thompson [10] noted that there were three broad perspectives on the ways that HR practice contributes to business performance:
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"Best Practice" – a set of HR practices can be identified, that, when implemented, will improve business performance.
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"Contingency" – business performance will be improved when the best "fit" between business strategy and HR practices is achieved.
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"Bundles" – specific bundles of HR practices can be identified that will generate higher performance in organisations; the most effective composition of these "bundles" will vary in different organisational contexts (see also [12]).
This latter point is significant because it highlights that there is no "magic bullet" in HRM: no single intervention is likely to provide a sustainable solution to all the workforce challenges facing an organisation.
Richardson and Thompson [10] summarised six key points from their review of the literature:
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The claims that there is a universal best practice HR strategy "are premature".
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Adopting a specified set of HR policies will not in itself lead to organisational success.
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The same "bundle" of HR policies may not be universally applicable.
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Virtually all current statistical analysis of HR strategies is based on "adding up a mixture of items from a somewhat arbitrary list of HR policies and practices".
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More evaluation attention needs to be devoted to examining the intermediary steps between the two end points of HR strategy and organisational performance.
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"How something is done is often more important than what is done" – but existing empirical studies concentrate on the latter.
With these cautionary notes in mind, the remainder of this section highlights the more influential studies on HRM and organisational performance from which Richardson and Thompson, and Caulkin, drew in reaching their conclusions.
Among the most quoted groups of studies are those by Pfeffer [13, 14]. He has summarised seven characteristics that he identifies as the core practices that "characterise most if not all systems producing profits through people". These seven characteristsics are:
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an emphasis on providing employment security
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the use of self managed teams
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decentralisation of decision making; and extensive training
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selective hiring of new personnel
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reduced status distinctions and barriers
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extensive provision of training
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compensation linked to performance [14].
Pfeffer drew on previous research, notably that by Huselid [15] in developing and testing his seven-point plan for HRM intervention. Huselid had concentrated on three aspects of the measurement of the links between HRM practice and firm performance: staff turnover, organisational productivity and corporate financial performance. He had developed a list of 13 "High Performance Work Characteristics". These included: formal information sharing; formal job analysis; staff participation in Quality of Work Life (QWL) programmes; workforce receives formal performance appraisal; and promotion based on merit.
Huselid tested the hypothesis that these 13 "High Performance Work Characteristics" would reduce staff turnover, increase productivity and improve corporate financial performance. Based on an analysis of data from 968 US companies he reported that the implementation of the "High Performance Work Practices" led to "better firm performance" – a relative 7% decrease in staff turnover, USD 27,000 more sales per employee, USD 18,600 per employee increase in market value and USD 3,800 per employee more in profits.
Whilst the work of Pfeffer, Huselid and others may be persuasive, Robinson and Thompson [10], Guest [16] and others have questioned the basis of some of the "universal" claims made about the connection between HRM strategy and organisational performance. They report that they are not convinced by the idea that there is a general prescription of HRM interventions that can be applied in any organization, irrespective of context and priorities, with the likelihood of a similar level of response and results. Guest [16] stresses that the examination of HRM and organisational performance remains a "young field of research" and sets out a range of methodological challenges that remain to be resolved, in terms of the measurement of HRM, the measurement of performance and the measurement of the relationship between the two (p.1095). He does, however, conclude that "results from both cross sectional and longitudinal research remains robustly positive" (p.1104).
Recent research [17] has also highlighted a so-called "prime building block" of HRM – the principle of "AMO". There must be sufficient employees with the necessary ABILITY (skills, knowledge and experience) to do the job; there must be adequate MOTIVATION for them to apply their abilities; and there must be the OPPORTUNITY for them to engage in "discretionary behaviour" – to make choices about how their job is done. The authors suggest that organisations wishing to maximize the contribution of their workforce need to have workable policies in these three broad areas.
The message from the key research on HRM and organisational performance is that the evidence base, although relatively "young" and limited, does provide general support that good practice in HRM (defined and measured by different sets of indicators in different studies) can make a positive difference to the performance of the organization. The indicators and metrics used to identify and measure organisational performance are either "proxy" measures, such as staff turnover or absence (the inference being that lower turnover, for example, will lead to improved performance), or measures of activity or financial performance. These studies examine a range of different sectors, but have focused mainly on the private sector manufacturing, finance and service industries. What are the lessons and implications of this limited but growing evidence base for the health sector?