The relationship between organization’s HR strategies and performance outcomes

Author: Iloka Benneth Chiemelie

Published: 12th of March 2014

An abundance of research exists when it comes to measuring the relationship among business strategy, HR, HRM practices and the performance of firms. There are also empirical findings relaying the idea that HRM practices can have positive impact on the performance of a firm (Boselie et al., 2005; Combs et al., 2006; Guest, Michie, Conway, & Sheehan, 2003; Huselid, 1995), while other researchers examining contingency framework argue that effective HRM practices are influenced by contextual variables such as the business environment or strategy (Chandler & McEvoy, 2000; Schuler & Jackson, 1987).

The significance of HRM to effective implementation of strategy in organizations has been recognized in a number of cases. For instance, it was made known by Porter (1985) that HRM is an important support activity in the organization, and when HRM is integrated with other value chain activities, it can be used by firms to achieve sustainable competitive advantage. Numerous views have been established as to how HRM influence strategies and performance in organization and these views are discussed below.

Resource-based view: this is the most prominent way of explaining strategic importance of HRM (Barney, 1991; Barney & Wright, 1998; Beltran-Martin, Roca-Puig, Escrig-Tena, & Bou-Llusar, 2009; Boxall, 1996; Phan, Chan, & Lee, 2005) and it defines firm by the volume of resource it controls. Additionally, it makes the assumption that companies are not homogenous in nature, instead they are different by the virtue of resource they possess. Thus, the relationship created here is that when firms possess resources that are rare, valuable, non-substitutable, non-transferable, non-imitable, and necessary capacity within the organizational sphere that it can use to exploit these resources, the firm will possess sustainable competitive advantage (Barney, 1991). Researchers have also argued that such important assets are developed over a long period of adopting strategic HRM practices (Boxall, 1996; Carmeli & Schaubroeck, 2005; Pfeffer, 1994; Senge, 1990).

Human capital development – human capitals represent the knowledge, skills, and abilities (KSAs) that people have on their own or within the team they work in (Becker, 1964). Past researches have linked HRM practice development of human capital to positive performance in companies. For instance, the study on public sector organizations in Israel found that firms who have higher levels of human resource capitals perform better when top manager associate these resources ability to provide distinctive value (Carmeli and Schaubroeck, 2005).

Social capital development – social capital represents the nature of relationships (as to the social processes and structures) establishing between people in the firm (staffs) and outside the firm (stakeholders) (Nahapiet & Ghoshall, 1998). The assumption of this view is that firms with high level of social capital perform better than their competitors. For instance, a study of managers from high-tech firms was conducted by Collins and Clark (2003) and the finding revealed that managers with high social capital as a result of strong relationship with stakeholders returned higher performance than other managers.

Conclusion

From the above discussion, it can be seen that be it in the human capital resource or social capital resource view, HRM has a direct influence on performance in the sense that the more positive these resource are, the more positive the outcome and vice versa.

References

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99–120.

Barney, J., & Wright, P. (1998). On becoming a strategic partner: The role of human resources in gaining competitive advantage. Human Resource Management, 37 (1), 31–46.

Beltran-Martin, I., Roca-Puig, V., Escrig-Tena, A., & Bou-Llusar, J. C. (2009). Internal labor flexibility from a resource-based view approach: Definition and proposal of a measurement scale. International Journal of Human Resource Management, 20(7), 1576–1598.

Boselie, P., Dietz, G., & Boon, C. (2005). Commonalities and contradictions in HRM and performance. Human Resource Management Journal, 15(1), 67–94.

Boxall, P. (1996). The strategic HRM debate and the resource-based view of the firm. Human Resource Management Journal, 6(3), 59–75.

Carmeli, A., & Schaubroeck, J. (2005). How leveraging human resource capital with its competitive distinctiveness enhances the performance of commercial and public organizations. Human Resource Management, 44(4), 391–412.

Chandler, G. N., & McEvoy, G. M. (2000). Human resource management, TQM, and firm performance in small and medium-size enterprises. Entrepreneurship Theory and Practice, 25(1), 43–57.

Collins, C. J., & Clark, K. D. (2003). Strategic human resource practices, top management team social networks, and firm performance: The role of human resource practices in creating organizational competitive advantage. Academy of Management Journal, 46(6), 740–751.

Combs, J., Liu, Y., Hall, A., & Ketchen, D. (2006). How much do high-performance work practices matter? A meta-analysis of their effects on organizational performance. Personnel Psychology, 59, 501–528.

Combs, J., Liu, Y., Hall, A., & Ketchen, D. (2006). How much do high-performance work practices matter? A meta-analysis of their effects on organizational performance. Personnel Psychology, 59, 501–528.

Guest, D. E., Michie, J., Conway, N., & Sheehan, M. (2003). Human resource management and corporate performance in the UK. British Journal of Industrial Relations, 41(2), 291–314.

Nahapiet, J., & Ghoshall, S. (1998). Social capital, intellectual capital, and the organizational advantage. Academy of Management Review, 23(2), 242–266.

Pfeffer, J. (1994). Competitive advantage through people: Unleashing the power of the workforce. Boston: Harvard Business School Press.

Pfeffer, J. (1994). Competitive advantage through people: Unleashing the power of the workforce. Boston: Harvard Business School Press.

Phan, P., Chan, E., & Lee, S. H. (2005). The impact of HR configuration on firm performance in Singapore: A resource-based explanation. International Journal of Human Resource Management, 16(9), 1740–1758.

Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. New York: Free Press.

Schuler, R. S., & Jackson, S. E. (1987). Linking competitive strategies with human resource management practices. The Academy of Management Executive, 1, 207–219.

Senge, P. M. (1990). The fifth discipline: The art and practice of the learning organization. New York: Doubleday Currency.