Marko Kesti of University of Lapland, Finland

The dissertation including synthesis and four articles deals with organization’s performance improvement through systematic human resource development process (HRD). One of the most important functions for human resource management (HRM) is to add competitive business value to the organization (e.g. Pfeffer 1994; Ulrich 1997; Guest 1997; Becker & Huselid 2006). Adding competitive business value means that besides administration HRM has to succeed in implementing chosen human resource practices for creating ‘competitive advantage through people’ (Pfeffer 1994). Purcell et al. (2009) state that despite extensive effort the goal of establishing clear link between HR practices and performance has still remained some way unclear.

In this dissertation the focus is on innovative tacit signal HRD process in use of human competence based organization business performance development. Tacit signals are feeding the necessary guiding information for the HRD process so that working groups can utilize their innovativeness in improving their performance. Optimal workplace innovations are collectively agreed upon optimal improvement actions that are derived from the tacit knowledge of the members of each working society. When these workplace innovations are implemented effectively there seems to be tendency for performance increase. Business performance increase appears to be the outcome of optimal workplace innovations, which are created through hermeneutic tacit signal development process. This phenomenon is being studied by using scientifically oriented practical approach.

Purcel et al. (2009) argues that more sophisticated, in debt, qualitative research techniques than Likert Scales (Likert 1932) are needed to reveal complex employee perception to provide necessary information for effective performance development. At tacit signals method the development needs are measured using relative inquiry scale with guiding forces. This method includes the phenomenon of inverted U-curve which is fundamental characteristic for human performance utilization (Yerkes & Dodson 1908, Goleman 2006). U-curve is formed when pressure increase (creative tension) will first improve performance until it turns to decline when the pressure turns to harmful stress. Tacit signals measure the side that persons feel they are in related to the competencies that form the quality of working life (QWL). The results of tacit signal inquiry are calculated and visualized using vector graphics. Dissertation opens innovative new methodology and algorithms for future research. In addition the dissertation explains the organization human complexity by heuristic concept consisting of human competencies (management, leadership, group culture, skills and process) and their relation to each other. The competence system intelligence model describes how the organization members’ behavior affects to competencies and how these competencies are interrelated.

Innovation can be defined as newly implemented knowledge based invention or strategic innovation that improves the organization competitiveness and performance (see Porter 2006). Innovations can be radical, organizational, product or technology innovations or they can be incremental (marginal) organization process improvements (e.g. Freeman 1987; Rogers 2003). Compared to radical type of strategic innovations the workplace innovations are incremental. Thus there is needed multitude of simultaneous improvements throughout the organization to make the organization wide change. The workplace innovations are as important for organization success as management, strategic, service and product innovations (e.g. Greenhalgh et al. 2004; Osborne & Brown 2005). The optimal workplace innovation can be seen as collectively agreed and successfully fulfilled improvement that best fit for the collective development needs identified at the working society. Organizations have long traditions for managing strategic innovations and product innovations; however workplace innovations are not so well utilized. Latter innovation group is more difficult to manage and therefore may form a competitive advantage. These workplace innovations meet the employee needs for development and thus improve the Quality of Working Life (QWL). QWL describes how the employees feel the organization is fulfilling the individual needs related to working life (Efraty & Sirgy 1988, Ramstad 2009).

The dissertation presents plausible explanation why human resource development may contribute better organizational business performance through improved quality of working life. There is a multitude of HR-practices which have been shown to have a positive correlation with business performance and quality of working life. However there are still lacking the comprehensive approach that explains the phenomenon of HRD meaning to fiscal business performance. Several studies reveal that the HRD investment’s impact on performance is not properly evaluated and therefore the management decision-making process lacks this essential information (Wang and Wilcox 2006; Swansson 2005; Bunch 2007; Kim and Cervero 2007). Therefore researchers are requested to try to open up the ‘black box’ of the causal relationship between HR components and unit of organizational performance (Becker et al. 2001, Fleetwood & Hesketh 2010). There is an obvious need for managers and executives to comprehend whether the HR development in question will produce a change in business performance, and if so, to what extent?

In the longitudinal business case study the systematic tacit signal HRD process was repeated twice during two years period. During that period (2005-2008) the Finnish economy growth was steady. The case company is one of the largest building material merchants in Finland with 19 business units (BU) consisting of 965 employees at 2005. According to the case experience it seems that the tacit signal development process has a tendency to improve the competencies contributing to the organization’s productivity and capacity increase. The phenomenon could happen as follows: workers experience developmental needs because they feel that their contribution gets somewhat wasted. Tacit signal HRD process will help working teams to implement optimal workplace innovations which improve the measured human competencies and the quality of working life. These improvements will reduce the wasted working time, thus increasing the share of effective working time. However abovementioned will increase the absolute effective working time only if HRD process is being done effective enough to contribute excess. Increasing effective working time makes it possible to produce more revenue with the same HR costs, leading to improved productivity. The phenomenon is logical and sensible and seems to explain the empirically grounded findings. In future these practical case studies should be verified also in organization with different cultural backgrounds. Hopefully this dissertation will encourage researchers and managers in utilizing better organization human resources innovativeness in creating sustainable competitive advantage.

These practical findings are explained by using hermeneutic deduction and mathematical equations which form a causal-explanatory HRM-P approach (grounded theory). Finally current findings suggests that HRD, QWL, structural human resources and business outcome need to be studied in combination to get answers on the HRM-performance connection. The article presents logical mechanism for QWL and HRD connection to business performance. Action research case studies seem to support the presented plausible HRM-P concept. It is possible to calculate HR-development meaning for the business in Revenue and EBITDA (earnings before interests, taxes, depreciation and amortization).

Longitudinal research case studies indicate that the optimal workplace innovations improve human competencies, whereas structural changes in staff tend to decrease them. Furthermore the case studies indicate that effective improvement of human competencies will contribute better revenue and human capital return on interest (HCROI). During the thesis there was created scenario analysis for testing the HRM-P theory in practice and identifying the possibilities that can be achieved through effective HRD. The HRM-P theory is further described mathematically in form of simplified human capital production function, which will be presented at qualitative and quantitative economics conference at May 2013 (QQE2013). This theory of human capital production function enables students and researchers to study HRD efficiency in business terms. Dissertation tacit signal method and organization system intelligence model is further studied at the Emotional Intelligence book edited by Annamario Di Fabio (2011).

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