HRM and organizational performance

Abstract

HRM is widely used to indicate a more strategic approach to personnel management, and typically one that is entails a greater emphasis on employee involvement and development. The claim that its adoption would lead to higher organizational performance spawned a research stream investigating whether this claim is justified. This chapter overviews this. I first identify the variety of concepts underlying the development of HRM and show how these led to significant diversity in the studies in the HRM–performance studies. For example, the emphasis given to involvement, human capital or rewarding performance varies. I then present examples of studies representing the different foci. All the studies reveal associations between HRM and performance, but in some this is unrelated to at least one performance measure. The different foci of the studies lead to differences in the HRM measures, which means it is difficult to determine the precise nature of the HRM associated with high performance. Moreover, I show the studies have a number of weaknesses e.g. they are cross-sectional, do not control for other managerial practices or do not examine the mediators of the HRM–performance relationship. I then outline studies that followed the first wave of HRM–performance studies that overcame in one or more ways these limitations; for example, Capelli and Newmark’s longitudinal research and studies that examined mediator. I conclude that the research stream is a potentially rich area of management studies, but the diversity across the studies, including in some of the results, means it is premature to say that certain HRM practices or approaches are superior to others. The emphasis in recent work on examining the mediators is significant, but more attention needs to be given to the diversity of concepts of HRM, which is contributing to the uncertainty about the what the stream has achieved.

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