Bringing Policies to Life: Discretionary Behaviour and the Impact on Business Performance

By

Sue Hutchinson, Nick Kinnie, John Purcell Work and Employment Research Centre

University of Bath, School of Management Working Paper Series

2003.12

University of Bath School of Management Working Paper Series

University of Bath School of Management Claverton Down

Bath BA2 7AY

United Kingdom Tel: +44 1225 826742 Fax: +44 1225 826473

http://www.bath.ac.uk/management/research/papers.htm

2003.01 Stephan C. M.

Henneberg The Conundrum of Leading or Following in Politics? An

Analysis of Political Marketing Postures

2003.02 Richard Fairchild Management’s optimal financial contracts, the degree of alignment with investors, and the ‘carrot and stick’ role of

debt.

2003.03 Richard Fairchild An Investigation of the Determinants of BT’s Debt Levels from 1998-2002: What does it tell us about the Optimal

Capital Structure?

2003.04 Steve Brown & Felicia Fai

Strategic Resonance Between Technological and Organisational Capabilities in the Innovation Process within

Firms

2003.05 Paul Goodwin Providing Support for Decisions based on Time Series Information Under Conditions of Asymmetric Loss

2003.06 Will Liddell &

John H Powell Are you still here?: Reconciling patient access and GP

effectiveness in the management of a large medical practice: a case study using QPID

2003.07 Felicia Fai A Structural Decomposition Analysis of Technological

Opportunity in Firm Survival and Leadership

2003.08 John Purcell & Nick Kinnie

Employment Regimes for the Factories of the Future: Human Resource Management in Telephone Call Centres

2003.09 Juani Swart & Nick Kinnie

The impact of client-relationships on organisational form and HR practices

2003.10 Sue Hutchinson,

Nick Kinnie & John Purcell

HR Practices and Business Performance: what makes a difference?

2003.11 Bruce Rayton, Kim Hoque & John Purcell

Does one size fit all? : Exploring the impact of employee perceptions of HR practices on motivation leve ls

3

2003.12 Sue Hutchinson, Nick Kinnie & John Purcell

Bringing Policies to Life: Discretionary Behaviour and the Impact on Business Performance

4

Bringing Policies to Life: Discretionary Behaviour and the Impact on Business Performance1,2

Sue Hutchinson, Nick Kinnie, John Purcell

Introduction

Despite the progress made in identifying possible associations between HR practices and

business performance over the last 10 years serious gaps in our knowledge remain. In

particular, the research leaves a number of key questions unanswered concerning how and why

HR practices impact on the performance of the business. The difficulty in addressing these

questions is linked, in part, to the research methods employed which have often been based on

the analysis of large scale survey data. There is a clear need for research which builds on and

complements our existing knowledge and employs methods that allow us to develop an

understanding of the detailed and intricate relationships between HR practices and business

performance.

This paper draws on case study based research currently underway which employs both

quantitative and qualitative data analysis techniques. In particular, it examines the importance

of discretionary behaviour by employees and managers and the effect of variations in this

behaviour on business performance. The root assumption is that virtually all employees have

the capacity to engage in discretionary behaviour and it is the ability of the firm to trigger such

useful behaviour that leads to higher performance beyond meeting basic job requirements. The

second proposition is that line managers have discretion in the way they apply certain, specific

HR practices (if they exist) and, more generally, in the way they behave towards employees.

1 Paper to be presented at the Bath Conference, University of Bath School of Management, 10-11 April, 2002 2 This paper is based on current research for the CIPD funded project ‘ People and Performance’. It is in draft form and should not be quoted without the permission from the authors

5

To study these types of discretionary behaviour requires a distinctive, a very different,

research methodology.

Previous Research

Many of the existing studies are based on large scale postal surveys which are analysed using

sophisticated quantitative techniques and recent reviews (Purcell, 1999; Richardson and

Thompson, 1999; Wright and Gardner, 2000) have highlighted the strengths and weaknesses of

this approach. One benefit is that this research has identified what appear to be stable and

robust associations between the adoption of various HR practices and improvements in

business performance. However, various shortcomings have also been discussed.

The level of analysis varies from the plant (Arthur, 1994; MacDuffie, 1995; Youndt et al, 1996;

Thompson, 2000; Applebaum, Bailey, Berg and Kallenberg, 2000), to business unit to

corporate level (Huselid, 1995). Many seek to count the number of HR practices in place

(Guest, 2001) but there is little agreement over what the core HR practices should be with

different researchers claiming success for rather different HR packages. For example,

employment security is included in some (Delery and Doty, 1996; Ichniowski et al, 1994;

Pfeffer, 1998) but is notably absent from others (Huselid, 1995; Arthur, 1994). There is no

agreement on the level of description of each HR practice. For example, ‘sophisticated

recruitment and selection’ does not describe the techniques, which is of little help to the

practitioner. These practices are also measured in different ways. One study, for example,

may look at the existence of a practice (‘yes/no’ answer) (Gardner et al, 2000), another at the

percentage of people covered by that practice (Huselid, 1995) and another at the amount or

level of the practice (e.g. how much training do employees receive). Typically, this data is

collected from a single respondent often using self completion questionnaires. Finally, there is

6

very limited use of performance measures and these are often drawn from the published results

or based on self-assessment (as, for example, in the Workplace Employee Relations Survey

1998, (Cully et al, 1999)) which while understandable, has severe limitations.

Some impressive associations between HR practices and performance, measured in different

ways, have come from this type of research and the use of large scale data sets is a

prerequisite. However, almost inevitably this type of research has to rely on an input-output

model. Thus there are a series of inputs on the left-hand side of the model and a series of

outputs on the right hand side with very little known about what goes on inside the model (the

so-called ‘black box’ problem). The inability to discuss how and why HR practices are linked

to business performance is, of course, a function of the largely quantitative approach to data

collection which has been adopted. Associated with this is the debate on causality – is it that

high performing firms have the resources to invest in HR practices or is it that high

performance is in some way influenced by HR practices? Few studies have explored this

problem which can only be addressed in longitudinal or time series studies or in cross

sectional research where there are multiple sites with few omitted variables such that

meaningful comparisons can be made (Purcell, 1999). Moreover, there has been very little

research into the views and attitudes of employees, yet if the argument about discretionary

behaviour holds, then it is these workers who should be central to studies in this field since it

is their behaviour and their antecedent attitudes which should be the focus of attention.

One notable exception to this pattern of research is work carried out by Appelbaum and her

colleagues (Appelbaum et al, 2000) who investigated the links between high performance work

systems and performance in a major study of 44 manufacturing sites in steel, apparel and

medical equipment between 1995 and 1997. They identified three types of generic people

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management practices (Appelbaum et al, 2000:118-120) which they thought were critical to

business performance. Skill enhancing practices are important because changes in work

organisation are only effective if employees have adequate skills to take up these opportunities

(thus placing emphasis on recruitment, selection and learning). Motivation enhancing practices

are important because even if we assume that employees have the opportunity and the skill, it is

still essential that they have the motivation in order to take up these opportunities (here a focus

on extrinsic and intrinsic rewards is necessary). Finally, involvement enhancing practices are

concerned with designing on line work systems and off line involvement activities so that

employees have a chance to become involved and participate in decision making. This

research represents a major step forward because it abandons the input-output model and

places the organisations studied within their sectoral context. Gardner, Moynihan, Park and

Wright (2000) use a similar framework of skill, motivation and empowerment enhancing HR

practices to test the impact of these on employee job satisfaction and organizational

commitment and relate these to performance outcomes of labour turnover and absenteeism.

Overall, however, much of the research to date has been frustrating for those seeking to

understand how and why HR practices influence operational and financial performance.

Indeed, existing studies have actually posed more questions than they have answered because

of the analytical model and research methods employed. In particular, three further concerns

remain. Firstly, we need to investigate to what extent the practices which are in existence are

put into operation, in other words, how are they actually delivered? How well do line

managers, for example, bring these policies and practices to life? In asking this question we

need to distinguish between explicit policies, such as say the requirement to appraise

employees annually (does it happen?, how well is it done?), from more diffuse HR practices

which the firm find difficulty in defining or codifying. An example here may be the written or

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implied injunction ‘to treat employees with respect’ or to discuss operational issues with them.

Second, the best people to judge how well managers exhibit these types of behaviours or put

these polices into practice in a meaningful way are the employees themselves. Finally, how

might we measure performance in ways which make sense to the managers and employees we

are investigating? Each firm will choose operational targets which are important to them and

which are likely to be directly related to business strategy. It is these targets or measures

which are likely to be really important, and be ones where employee discretion is likely to

have a measurable impact. Examples here may be quality or wastage rates or levels of

customer satisfaction. Pure financial measures of the sort reported publicly for the whole

corporation are much more remote and numerous other factors cloud the relationship between

input and output. In short we need to find measures which are meaningful to the firm and which

are likely to be susceptible to employee behaviours. If we can answer these questions we can

then begin to look more closely at the intricate links between HR practices and business

performance.

We argue that both the model used and the methods for collecting data need to be changed if we

are to begin to answer these key questions. We will now explain the theoretical background to

our approach and then describe the methods of data collection used in our research.

Discretionary behaviour, employee attitudes and organisational performance

Much of the existing research assumes that the practices which are in place are actually put into

operation by line managers. We argue that this assumption cannot be justified. For a variety of

reasons, well designed policies are often not implemented in the way in which they are

intended, an issue which has been discussed extensively elsewhere (Legge, 1995). The

familiar issue of the difference between espoused and enacted practices is relevant here

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together with the study of the conflicting demands of line managers concerned with operational

requirements such as cost, control, quality, speed and budgets and HR concerns typically for

consistency, stability, equity and performance. Together these concerns mean that simply

counting HR practices is necessary but not sufficient for understanding the links between HR

and performance.

This opens up a much wider area for study and one which is crucial for understanding the links

between HR practices and business performance. We need to understand how the various

practices are actually implemented by line managers and how these practices are perceived by

employees. In order to understand this we need to take a step back and explore the links

between discretionary behaviour, employee attitudes and business performance.

Appelbaum and her colleagues (2000) have recognised that discretionary behaviour is one of

the keys to understanding the links between HR practices and organisational performance:

‘plant managers who invest in the skills of front-line workers and include these workers in

decision-making activities elicit discretionary effort by employees. This effort increases

operating efficiency and competitive advantage’ (Applebaum et al 2000:235). Discretionary

effort was also central to MacDuffie’s analysis in the motor vehicle industry (1995). We

explore this concept in more detail and draw on the work of Fox (1974:16) who distinguished

between two characteristics of work roles. 'Task range' refers to the variety of tasks in a job,

which at the one extreme can be highly specific and at the other very diffuse. The second

characteristic is 'discretionary content' which looks at the extent to which the behaviour needed

in a job which is highly specified or diffuse. More critically he argued (1974:18) that 'every

job contains both prescribed and discretionary elements' and the discretionary elements

'requires not trained obedience to specific external control, but the exercise of wisdom,

10

judgement and expertise. The control comes from within, it is in a literal sense, self control.

The occupant of the role must himself (sic) choose, judge, feel, sense, consider, conclude what

would be the best thing to do in the circumstances, the best way of going about what he is

doing' (1974:19).

Moreover, Fox argues that the key link with performance is to get employees not just to do their

job but to act beyond contract to go over and above what they are formally required to do.

Rather than just carrying out their job mechanically, to the minimum specification required, the

aim is to try to get employees to use their imagination, creativity, enthusiasm, initiative and

intimate knowledge of the organisation. In addition, the organisation may seek to elicit

discretionary behaviour through activities outside the job such as off-line participation. This

may be particularly important where there are strong operational limits to the extent to which

employees can exercise discretionary behaviour in the performance of their tasks.

Following insights drawn from modeling the psychological contract (Guest and Conway, 1997)

and outcome effects when contracts are breached (Robinson, 1966), and from studies linking

HR policies with consumer behaviour (Peccei and Rosenthal, 2001) we argue that employee

attitudes, connected to job satisfaction and organisational commitment and motivation,

influence the exercise of discretion by employees. It is this which is linked to business

performance. One of the key ways to improving performance, therefore, is to improve the

levels of job satisfaction and organisational commitment which encourages employees to

exercise their discretion and act beyond contract. The exercise of this discretion may create a

virtuous circle whereby there is an increase in job satisfaction and organisational commitment

which further encourages employees to behave over and above the minimum required.

Secondly, and crucially, the exercise of employee discretion is affected by the way in which

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managers exercise their own discretion. Even in the most standardised organisation managers

will have some discretion as to how they put HR practices into operation and employees are

more likely to act beyond contract if managers behave in ways which stimulate and encourage

this kind of behaviour in their employees. So we are not only looking at employee

discretionary behaviour, but also manager discretionary behaviour and crucially it is the

interplay between these two which is linked to business performance. For example, the

manager who carries out performance appraisal interviews with their employees

enthusiastically and thoroughly in a way over and above what is actually required is likely to

encourage their employees to reciprocate with behaviour which is similarly ‘beyond contract.’

These links between employee attitudes, discretionary behaviour and performance outcomes

represent the core of the model which we present in Figure 1. In order to understand what

affects these factors we need to consider the HR practices and job design characteristics which

affect the ability and skill of employees, their level of motivation and their opportunities to

participate in decision making. Figure 1 identifies the three generic HR practices similar to

those used by Appelbaum et al (2000) and Gardner et al (2000) which we call here ‘ability,

motivation and opportunity’(AMO). The more precise and distinctive HR policies and

practices shown in the figure, and which feed into these generic approaches, have been

identified from earlier research as linked to performance (eg Dyer and Reeves 1995), whether

‘bundled’ together or not. These typically cover recruitment, training and development,

appraisal, pay, involvement, career opportunities and job security. The key job design

characteristics are the degree of job challenge and the level of teamworking. Finally, the

distinctive contribution of front-line managers is indicated in the centre of the model, mediating

the effect AMO on employee attitudes and thence to discretionary behaviour and performance.

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It is this mediating role, whether positive or negative, which is the particular focus of this

paper.

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People and Performance: Linking HCM/HPWS to Performance

Training and Development

Performance Appraisal

Career opportunity

Recruitment

Pay satisfaction

Job challenge

Teamworking Involvement

Ability/skill ---------------------- Motivation/ Incentive ---------------------- Opportunity to participate

Organisation commitment -------------- Job satisfaction

Performance outcomes +

Communication

Job security

Management Encourage-ment Behaviour/ respect Trust

Discretionary Behaviour

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Research methods

The research, which commenced in September 1999, is based on a two and a half-year

longitudinal study which investigates how and why people management practices affect

business performance3. Sponsored by the Chartered Institute for Personnel and Development,

the study looks at 12 organisations from a wide range of sectors including manufacturing, retail,

finance, professional services, IT and the NHS. In each case a unit of analysis was chosen as

the focus of our research, such as the southern region sales force for one of the financial

services organisations and a clinical directorate in the case of the Trust hospital. The research

design is both qualitative and quantitative and seeks to overcome some of the problems of the

existing research discussed above. Extensive interviewing is conducted both at corporate

level and at the unit of analysis with senior decision-makers, first line managers/team leaders

and front line employees (such as financial consultants, sales associates). These latter

interviews, which are structured and use a questionnaire (with control questions from the

Workplace Employee Relations Survey 1998) administered to around 40 employees in each

unit of analysis, seek to explore how people management practices impact on employee

attitudes and behaviour. They are repeated after 12 months to allow us to track changes that

are taking place both at an organisational level and in the unit of analysis. We believe that one

of the strengths of this research are these individual face-to face interviews with employees (in

other words, those at whom the practices are aimed at) which allows us to provide a fairly

accurate assessment of the impact of the HR practices that exist in the unit. We can classify

employees response to an attitudinal question on a Likert type scale, but then ask ‘why did you

say that?’ to explore the meaning and multiple interpretations to their response. Of course,

given finite resources, this methodology limits the number of respondents and we are forced to

trade off between depth and breadth. The multiple respondents design enables us to uncover

3 Other members of the research team are: Kim Hoque, Bruce Rayton and Juani Swart.

15

differences between stated policies and the implementation of those policies. The interview

data are examined alongside performance data (financial, operational and HR measures) and

information on the HR policies for the unit of analysis. Thus these data allow us to measure

more precisely than previous studies the relationship between HR practices, employee

outcomes and performance.

This paper draws principally on research conducted in one of our case study organisations to

analyse the links between discretionary behaviour, employee attitudes and business

performance. We first describe the context of the case and then discuss some of findings from

our employee interviews in detail.

Omega

Omega is a successful growth company and one of the largest retail organisations in the UK,

employing a large number of staff in Sites across the country4. Although the industry has seen

very little growth in recent years Omega has successfully increased its market share through a

policy of lowering prices (the company claims to have reduced prices by 7.5% over the last

four years) and improving customer service. It currently holds a dominant share of the UK

market in its core business, and is growing rapidly in related areas. The company plans to

continue expanding in the UK opening up new Sites on brownfield sites in regeneration areas.

The organisation underwent considerable change in the mid 1990s in order to improve its

competitive position, with a much greater emphasis on a customer facing culture (or as one

Head of HR remarked ‘1995 saw the evolution of a customer-focussed business’). One of the

many changes introduced at this time was the balanced score card approach to measuring

4 Some details of the case have been changed or omitted to preserve the anonymity of the organisation.

16

business performance, originally developed by Kaplan and Norton (1992). In Omega the

scorecard has four quadrants – people, finance, customers and operations and each Site’s

performance is measured against specific targets in each area. In the people quadrant, for

example, targets include recruitment, development, retention, labour turnover, absence and staff

morale (taken from the staff attitude survey). Although the four quadrants are not weighted, one

retail director we interviewed considered the ‘people’ quadrant to be the most important, as he

explained ‘if we can recruit, maintain and deliver fantastic people then operationally we

can deliver’. The introduction of this approach brought about a much greater focus on people

and customer issues in the Sites which historically had been driven by financial and

operational results, and a consequent planned change in culture which is seen as a major

catalyst for Omega’s recent success.

Delayering also took place as part of the restructuring in mid 1990s and within the Sites there

are currently four levels: Site manager, senior managers (mostly operational managers), section

managers and general assistants. Each Site is run by a Site manager whose job it is to provide

coaching, guidance and support and to deliver the Omega ‘standard’. As one Site manager

explained ’my role is to mobilise the team with a goal, to be energetic and to be able to

motivate people’. There is a senior management team which includes operational managers

responsible for departments and in an average sized Site (employing around 400 staff) this

would comprise 5/6 managers which typically would include the Site manager, personnel

manager, customer services manager and operations managers. Each member of this team,

including the personnel manager, takes a turn in managing the Site for around 20% of their

working time so that they gain an understanding of the wider business issues. The personnel

function within the Sites (over two-thirds of Sites have their own personnel manager) has

undergone considerable change over the last 5/6 years, moving from a predominantly

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administrative and welfare role to a Site level senior management position. The role of the

personnel manager includes taking responsibility for the payroll and controllable expenses and

ensuring that the Site maintains productivity levels. This means focussing on the people

measures such as absence management, employee appraisal and development, resourcing and

succession planning. One of the benefits of the balanced score card approach has therefore

been to make the role of the personnel manager much clearer within the Sites and enabled the

function to measure themselves against specific goals.

A more recent change within Omega has been the drive for consistency across Sites and all

policies, procedures and processes are centrally determined and their implementation closely

monitored. Each Site is governed by the company routines handbook which provides detailed

information on how every task is to be performed - this is down to the minutest detail even

including details on office layout, such as where pictures should go on the wall, and where the

waste paper bin should go! (referred to as ‘detail madness’ by one Site manager). On the HR

side all policies and procedures are highly centralised and controlled - the wages budget for

example is fixed for each Site and there is no local flexibility on pay – something which was

obviously a cause of great frustration in some of the Sites we visited where recruitment,

retention and staff quality were on-going major problems. Although the Sites cannot function

without these routines it is the way in which the rules and routines are implemented that is

considered a key ingredient to success. It is management, in particular Site managers, who are

responsible for how the policies and processes are implemented and their behaviour is

therefore critical to a Site’s performance. This is borne out by the preliminary results from year

one of our research.

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Our research focussed on the section manager population which is a first line manager position

within the Site. Spans of control are normally 18 general assistants to each section manager and

in a large Site there may be about 20 section managers covering different areas of the Site. In

addition to being responsible for the day to day running of their areas section managers take

responsibility for a range of people management tasks such as recruitment, training,

performance appraisal, disciplinary and grievance issues, and pay enquires. The nature of the

job is therefore very demanding, particularly on the people management side, and because, as

one site manager remarked ‘… they are in between the customer and senior managers’. This

may partly explain why many Sites face recruitment and retention difficulties with this position.

We looked at four Sites in a single region. All were in market towns with similar socio-

economic profiles. Two of the Sites were classified as high performing and two low

performing, although which was which was not revealed to us until after the first year

interviews. In total 43 section managers were interviewed using our structured questionnaire,

representing over two –thirds of the section manager population in those Sites.

Discretionary behaviour, employee attitudes and organisational performance in Omega

Having described the organisational context of our case study we will now look in more detail

at the links between employee attitudes, discretionary behaviour and organisational

performance drawing on the empirical data which we have collected. Our discussion follows

the development of our theoretical model by looking first at the exercise of employee and

manager discretion, then considering employee attitudes and finally examining performance

outcomes.

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Employee discretion

We consider first the variations in perceptions of employee discretion across the Sites studied

in Omega (Table 1). Any variations here will be particularly important since these jobs are

supposed to be standardised across the whole company following routines and procedures set

by head office. However, as Fox has argued ‘no role can be totally diffuse or totally specific',

even in tightly controlled jobs some residual element of discretion always remains’ (1974:19-

20).

Insert Table 1

Evidence of variations in this discretion is clearly present. There are, for example, marked

differences between the Sites on the extent to which employees claim they have influence over

how they carry out their job. Table 1 shows that 27% of employees in Site C say they have ‘a

lot’ of influence over their job, compared with 64% who say this in Sites A and B and a half

who say this in Site D. Only around one third of employees in Site C are satisfied with their

level of influence and 18% are dissatisfied. This compares starkly with the other Sites,

especially Site D where all the employees are satisfied with their level of influence over their

job. These two measures are likely to be highly influenced by the way local managers

implement the rules set by head office, as the following quotes from two section managers with

similar jobs and length of service in the job suggest:

‘I’m very dissatisfied …..I’ve no chance to show what I can do, the Site manager tells me.

I’m disheartened – I don’t feel valued and am not used to my full potential’

(Section manager, Site C)

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‘(I’m satisfied with the influence I have over my job) because I get support from all levels –

if you’ve an opinion you are free to disagree’

(Section manager, Site B)

However, there are fewer variations in the extent to which employees find their job challenging

(with a range between 82% and 100%), perhaps because this reflects the inherent nature of

what is basically a very demanding job which is less susceptible to local interpretation.

Managerial discretion

We look next at variations across the Sites in both cases in the way local senior managers

exercise their discretion when putting head office routines into operation. This is a particularly

important area of discretionary behaviour since as one Site Manager in Omega explained ‘the

routines should be viewed as providing a focus and structure… they are necessary in terms

of delivering best practice but it is the way in which the rules and routines are implemented

that makes them effective and brings them to life’.

Our research investigated this exercise of managerial discretion by collecting employee

perceptions about senior managers in the following areas:

(i) Involvement and communication

(ii) Dealing with problems in the workplace and treating employees fairly;

(iii) The respect employees get from their immediate line manager

(iv) The extent to which the line manager provides coaching and guidance

(v) How good employees feel the company is at sharing and exchanging knowledge and

experience.

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Insert Table 2

The results in Table 2 show that there is a high level of variation in employees’ perception of

the exercise of managerial discretion in Omega. Employees in Site C have a consistently poor

perception of the way senior managers exercise their discretion; the responses in this Site are

either the lowest or equal lowest across all the measures. This suggests that senior managers

in Site C have a very controlling style of managing which is considered poor in terms of, for

example, allowing staff to comment and responding to suggestions from employees (18% agree

that managers are good at these activities). This compares to around three quarters of

employees in Site B who believe this. These relatively poor results are repeated, but in a less

extreme way, when the results for Site C are compared with the others in terms of how good

managers are at dealing with problems at the workplace, treating employees fairly, with the

respect employees get from their line manager and with how good the company is at sharing

and exchanging knowledge. The other distinct pattern is the consistently good performance of

Site B across all the measures.

The impact of local senior managers is clear to see here. Even though there is a heavy

standardisation of routines local senior managers are able to exercise their discretion in how

these are put into practice and this is clearly reflected in employee perceptions. The following

quotes from our interviews reflect this:

‘It’s a good company to work for but the management within individual Sites varies and HQ

are often unaware of particular issues surrounding Site managers…..in terms of their style

of management- there are different styles in different Sites’

22

(Section manager)

‘Getting the right managers into the right Site is the biggest issue I have to deal with’.

(Regional Director)

Employee satisfaction and commitment

Having considered the variations in employee and managerial discretion we will now look at

our evidence on employee job satisfaction and organisational commitment. If we look first at

employee satisfaction with the sense of achievement they get from their job we find there are

relatively few variations between the Sites. Table 3 shows again that Site C has relatively low

levels of motivation (54% are either very or fairly motivated) compared to 80% in Site D and

92% in Site B saying this.

This pattern is also found when we look at measures of employee commitment (Table 4) where

we find few variations in sharing values and loyalty. However, it appears that pride (where

only 46% in Site C agree or strongly agree with this compared with around 90% in Sites A and

D) and the perceived state of employee relations, where again only two thirds in Site C say this

is good or very good compared with 91% in Site B. It is possible identification here is with

the Site and that these measures are more affected by local managers' discretion.

Insert Tables 3 & 4

Perhaps most intriguing of all is that this pattern of satisfaction and commitment is also

reflected in terms of attitudes towards certain HR practices in Omega as shown in Table 5.

Both Sites A and C have low scores for satisfaction with the level of training, and

23

opportunities for career advancement. Variations in the levels of satisfaction with pay are

especially interesting, given that pay rates for these employees are standardised, with as few as

9% of employees in Site C being either satisfied or highly satisfied with their pay compared

with 64% in Site B. Employees who suffer from poor levels of satisfaction and motivation in

general may well be transferring their feelings over to specific HR practices. This has

profound implications for the focus on HR policies in providing the necessary environment for

discretional effort since perceptions on and satisfaction with these policies is clearly

influenced by the context in which they are applied.

Insert Table 5

Performance outcomes

Finally, we present some preliminary data on measures of performance in table 6 which for

Omega compares Site performance data to the regional average.

Insert Table 6

It is clear from the data that Site C is the poorest performer in a number of key areas. For

example its expenses were 28% higher than the average and its profit contribution was 34%

lower. It seemed particularly poor at managing wastage which was one of the key indicators

used by Omega. In contrast Site B has expenses which were 2.4% lower than average and

profits which were 21% higher. Site A has profits which are 13% below the regional mean

and Site D has profits which are almost at the mean. Other measures of performance also

follow this pattern of Sites B and D generally being above average performers and Sites A and

C being below average, with the performance of Site C being particularly poor. These

24

performance measures are among a group of the key indicators5 used by Omega to assess

operational efficiency and they link these to their business strategy and financial success.

Discussion

The findings from this case are clear: even though Omega is a highly standardised organisation

seeking consistency in all its practices we have evidence of variations in the implementation of

HR practices and of employee views of the ways managers exercise their discretion. Sites A

and C are generally lowest in terms of managerial behaviour, employee discretion, employee

attitudes and overall performance compared to Sites B and D. There is a strong association

between employee attitudes on a wide variety of job design and HR practices, employee views

on the quality of HR management applied to them, especially the opportunity to participate and

Site performance. It is possible, even at this early stage of the analysis, to trace a pattern of

results which is repeated through the different kinds of data which links the exercise of

discretion, employee attitudes and Site performance. Indeed, we argue that the ways in which

senior managers, in particular the Site Manager, exercise their discretion effects the

willingness of employees to go 'beyond contract' and consequently to improve business

performance.

We now need to look more carefully at these findings and ask how we can explain the pattern

of results identified. In particular, we need to consider what are the organisational

characteristics of Omega which allow senior managers to have this high level of influence.

There are a number of factors which account for the influence of this exercise of managerial

discretion: the nature of employees' jobs, the frequency of their interactions with the senior

managers and their contact with their peer group.

5 Absence and turnover figures are also used but were being revised and not available for the year in question.

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The employees we interviewed were Section Managers who were carrying out standardised

jobs across the four different sites we studied. Each of these has a distinct area of

responsibility for which they are held accountable, which probably accounts for the

consistently high scores for job challenge. Although the Section Manager jobs are standardised

they do have some freedom in how they actually carry out some of their job tasks, compared,

for example, with someone working on an assembly line which is more highly prescribed.

Section Managers have no control over some of aspects of their job such as the price, type or

availability of the products which they sell. However, other tasks have a higher discretionary

content. Indeed, in the words of one Section Manager, 'the only thing I have control over is

the way I manage my people’. The exercise of this freedom is shown in the extent to which

these employees feel they have influence over their job and how satisfied they are with this

influence.

We argue that the willingness of Section Managers (who are akin to supervisors and team

leaders in other companies in our research) to exercise this discretion is particularly affected

by the ways the Site Manager and the senior management team exercise their discretion. In this

case the Site Manager and senior managers have many opportunities to exercise their

discretion, especially over the way in which they manage their people, and they are likely to

play a big part is defining the style of management which is seen as acceptable. The Section

Managers meet senior managers, including the Site Manager, frequently, sometimes more than

once a day and these meetings can be intense if there is a short term operational problem to be

solved virtually immediately. Indeed, there is something of a dependency relationship between

the Section Manager and senior managers. This can be contrasted with one of our other cases

26

where the employees studied only see their line manager once or twice a month because they

work remotely.

Not only is interaction frequent and intense but Site Managers inevitably have a high degree of

freedom over how they handle issues such as allowing employees to comment on proposed

changes, responding to suggestions for change and providing coaching and guidance as well as

how they implement certain HR practices such as conducting appraisals. So we have a

situation where senior managers, and in particular Site Managers, have high discretion over

how they manage their people, within standardised routines, and this in turn affects the way

Section Managers exercise their discretion, which is also mostly over people management

issues.

This is likely to lead to a high level of identification with the particular site on which they are

based. The effect of this is seen not only in variations in the influence employees feel they

have but also in variations in the respect they have for their line manager, the state of employee

relations and their pride in working for the company. There are, however, other factors which

appear to be less affected by the senior management team. For example the results for

company loyalty and sharing company values are consistently high. In these instances our

respondents appear to be answering the question more in the context of the company as a whole

rather than for the particular site on which they are employed.

The Site Manager is particularly influential in setting the tone for the way of managing

employees across the site. They provide a role model through their own way of managing their

staff and set the expectations for achieving certain goals and behaviours which are acceptable

when dealing with individual employees. It is possible that the power of the Site Manager is

27

unusual and a characteristic of ways of managing within this sector. Certainly this can be

contrasted with another of our cases where the influence of a single manager is not so

important. In this other case there were at least two managers with whom the employees

interacted and each of these could exercise their discretion independently.

Identification with the site is further enhanced by the frequent and intense interaction which our

employees have with their peer group. They work alongside one another and need the co-

operation of other Section Managers in order to do their job well. This frequent contact allows

employees to share their attitudes and opinions freely and may encourage them to form a

common view about certain aspects of working on that Site. This can be compared with

another of our cases where the peer groups meets infrequently, perhaps only twice a month.

This 'group think' appears to not only affect areas over which Site Managers do have

discretion, but also affects issues, such as pay, over which they do not have discretion.

Conclusion

Our study has demonstrated convincingly that research which only asks about the number and

extent of HR practices can never be sufficient to understand the link between HR practices and

business performance. Despite the four Sites in Omega having standardized practices we have

seen marked variations in the way they are implemented and in employee responses to, and

perceptions of, these practices. These variations are also reflected in the variations in

performance in each Site.

In discussion, we identified a particular combination of conditions in Omega which may

account for this pattern of results. Site Managers themselves had freedom over how they

managed their staff, frequent interactions with the Section Managers and were very influential

28

in defining the acceptable style of management. Although the Section Manager jobs were

standardised they did have discretion in people management areas and they had frequent

interactions with their peer group. Thus the effect of managerial and employee discretion on

performance is likely to be mediated by the opportunities to exercise this discretion, the

frequency of their interaction and the extent to which they identify with their team.

There are, of course, a variety of possible explanations for this pattern over and above those

we have discussed. One is what we might refer to as the ‘halo’ or ‘horns’ effect discussed by

Wright and Gardener (1999) whereby employees working, for example in a high performing

Site, will have a more positive view of their discretion, in other words the direction of

causation goes from performance to attitudes via discretionary behaviour, rather than from

attitudes to performance. Although it is possible it is less likely in an organisation with the

highly standardised characteristics of Omega and where variation in Site performance cannot

be explained by extraneous factors such as differences in products, markets, customers or

technology . Most unusually there were virtually no differences in these factors.

Given that in Omega the Sites share a common market context and that the company is

centralised with detailed manuals covering every aspect of the managerial role and very little

policy discretion, the only variance is the way managers actually apply these rules - or as one

manager put it ‘bring them to life.’ This is especially the case in the way people are managed

which is reflected in marked differences in employee attitudes in the four Sites. Our evidence

here is that the way managers encourage, allow and support the exercise of discretionary

behaviour by employees is a crucial intervening variable between HR practices and in this

case, Site performance. Given that we are looking at one occupational group, section

managers, in four similar sites located in similar socio-economic locations we can be even

29

more confident than Gardner et al in their study of food service distributors in the USA that our

study is ‘exceptionally free of the effects of omitted variables’ (2000, 30). This has powerful

policy and practice implications.

These results have parallels with the study of Canadian banks conducted by Bartel (2000). She

concluded that Site managers ‘create a human resource management environment that can

impact on Site performance’ (Bartel, 2000:20). In particular, it was the quality of the

performance feedback system and the quality of communications between the manager and staff

which had significant affects on Site performance’ (Bartel, 2000:28). However, she did not

relate this to staff perceptions on discretionary influence over how their jobs were performed

and it is this, following Appelbaum et al (2000), which is crucial and is related to job

challenge and satisfaction.

We have reported the preliminary results of our study and these must be treated with caution

because of the choices which we, like all researchers, have had to make in the research design.

Although in Omega we interviewed two-thirds of the population of section managers in the four

Sites the number of respondent is very small. We are particularly interested to see how the

results from the second round of data collection compare with the first. Following this

rigorous tests of causality will need to be undertaken. However, at this stage the most credible

explanation for the differences in performance is the way Site managers exercise their

discretion in managing staff, especially in influencing how the staff do their jobs. If this central

thesis on discretionary behaviour is correct, then the focus of future research should be on the

first line managers and employees who exercise this discretion.

30

Table 1: Employee Discretion

Site A Site B Site C Site D

% % % % My job is challenging

Agree 100 91 82 80

Neither agree nor disagree 9 10

Disagree 9 9 10

Generally, how much influence do you have over how you do your job?

A lot 64 64 27 50

Some 27 36 36 40

A little 9 27 10

None 9

How satisfied are you with the amount of influence you have over your job?

Satisfied 82 82 36 100

Neither sat. nor dissatisfied 9 18 46 Dissatisfied 9 18 N=43

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Table 2: Management Discretion

Site A Site B Site C Site D % % % % How good are mgrs. at providing everyone with a chance to comment on proposed changes? Good 55 73 18 30 Neither good nor poor 27 18 46 60 Poor 18 9 36 10 How good are mgrs. at responding to suggestions from employees? Good 27 82 18 60 Neither good nor poor 46 9 46 40 Poor 27 9 27 How good are mgrs. at dealing with problems at the workplace? Good 73 82 55 70 Neither good nor poor 18 9 36 30 Poor 9 9 9 How good are mgrs. at treating employees fairly? Good 64 100 64 70 Neither good nor poor 27 9 20 Poor 9 27 10 To what extent does your line manager provide coaching & guidance to help improve your performance? To a great extent 46 55 27 40 To some extent 27 45 36 40 To a limited extent 27 9 20 Not at all 27 How satisfied are you with the respect you receive from your immediate line manager? Satisfied 100 91 64 90 Neither sat. nor dissatisfied 9 9 Dissatisfied 27 10 How good do you feel the co. is at sharing & exchanging knowledge & experience? Good 64 82 18 70 Neither good nor poor 27 18 64 20 Poor 9 18 10 N=43

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Table 3: Job Satisfaction Site A Site B Site C Site D % % % % How satisfied are you with the sense of achievement you get from your work? Satisfied 64 73 64 80 Neither satisfied nor dissatisfied 27 9 18 10 Dissatisfied 9 18 18 10 How motivated do you feel in your present job? Very motivated 55 46 36 40 Fairly motivated 27 46 18 40 Not very motivated 18 9 36 10 Not at all motivated 9 10 N=43

Table 4: Employee Outcomes Site A Site B Site C Site D % % % % I share the values of the organisation Agree 82 100 82 90 Neither agree nor disagree 18 18 10 Disagree I feel proud to tell people who I work for Agree 91 73 46 90 Neither agree nor disagree 9 27 36 10 Disagree 18 I feel loyal to the company Agree 73 91 91 100 Neither agree nor disagree 27 9 9 Disagree In general, how would you describe relations between management and employees here Good 73 91 64 80 Neither good nor poor 18 9 18 20 Poor 9 18 N=43

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Table 5: Employees perceptions about certain HR policies and practices

Site A Site B Site C Site D % % % % Training & Development How satisfied are you feel with the level of training you receive in your current job? Satisfied 46 82 36 90 Neither sat.nor dissatisfied 9 9 9 Dissatisfied 36 9 55 10 How satisfied are you with your current career opportunities? Satisfied 64 91 55 70 Neither sat. nor dissatisfied 9 9 30 Dissatisfied 27 9 36 Pay and Reward How satisfied do you feel with your pay? Satisfied 46 64 9 60 Neither sat. nor dissatisfied 18 36 18 30 Dissatisfied 36 73 10 How satisfied are you with the method of appraising your performance? Satisfied 50 82 64 90 Neither sat. nor dissatisfied 10 9 18 10 Dissatisfied 30 9 18 How satisfied do you feel with the rewards and recognition you receive for your performance? Satisfied 46 91 55 50 Neither sat. dissatisfied 46 9 27 30 Dissatisfied 9 18 20 N=43

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OMEGA- COMPANY PERFORMANCE DATA 2000/01

(Based on averages for 12 month period feb 2000-feb2001)

Table 6: Percentage variation from regional average (20 Sites)

Site A Site B Site C Site D Availability -0.1 0.6 -0.8 0.3 Waste/known loss -5.5 4.7 -11.8 7.1 Shrinkage/unknown loss 5.4 63.5 -59.5 44.6 Operating expenses as % of sales 2.4 2.4 -28.2 -11.7 Waiting to be served 2.4 -6.9 -0.6 -3.3 Payroll costs as % of sales -4.3 14.8 4.3 0.1 Profit Contribution -13.0 21.4 -33.7 -0.1 Turnover £m 42.6 71.1 48.2 54.8

NB. Data has been corrected to ensure that positive figures reflect better than average performance and negative figures show worse than average performance.

35

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