The idea of organizational performance includes both the ‘What’ and ‘How’ of achievement. There are various means to measure firm’s performance, such as key performance indicators (KPIs), which are usually to do with financial results (profitability) or productivity. Measuring the “how” is more difficult as it relies on qualitative aspects of assessment of effectiveness.

The following four factors are the most important reasons why HRM should be linked with organizational performance −

Roles

People should have a clear idea of their as well as the roles of others in an organization. Every successful team has well-defined position for its members. Everyone is aware of what he or she has to do, how to do it and how their performance can affect the organization.

In business, this means you need to have clear reporting structure. It is the duty of HRM to define and set rules for employees.

Rules

Having a clear set of behavioral expectations is important to establish that you’re not contributing to the bad behavior as an employer. Setting clear and specific rules establishes a framework for spotting and addressing violations of behavioral standards.

Loosely defined general standards lead to violations. The result of such ambiguousness is often litigation. HRM plays a key role in defining the company standards and minimizing violations.

Consequences

It’s necessary to clearly state the consequences for violations of behavioral standards. In addition, clear consequences help to ensure that options for dealing with violations are not limited. To establish the standards and violation consequences, it’s essential to know ahead of time what employee actions require an immediate dismissal.

The HR is responsible for drawing these fine lines. Similarly, HR managers know what performance issues may qualify for a more progressive disciplinary approach, and they define the steps involved in such an approach. HRM thus plays a disciplinary role as well, which is indispensable for organizational performance.

Tools

Tools are vital not just to help avoid litigation, but also to diminish the duration of time it takes for the owner to deal with non-productive people issues instead of core business processes. Many small-business owners use attorneys and HR consultants on an a la carte basis to address such issues.

Whatever the approach, the key to success is to devote the time and resources it takes to develop a policy and practices strategy for your business. It is wise to invest in people of the organization because they build the organization. It’s an investment that can provide huge dividends in terms of increased productivity and minimized litigation. Nonetheless, it is an essential component of your comprehensive people strategy and HRM is responsible for overall nurture and growth of this domain.