The Impact of HRM

Edited and adapted from Chapter 24 of Human Resource Management in a Business Context, 3rd edition. Copyright ©Alan Price 2007.

Is there any evidence that the implementation of HRM has a significant effect on national or organizational economic performance? After all, this is the justification implicit in HRM models for valuing the human resource above all others. When the first edition of this book was written (in the mid-1990s) the conclusion was that we simply did not know. (...)

Since then, progress has been made in conceptualizing the problem and measuring results (...). For example, Huang (2000) looked at 315 firms in Taiwan and related their human resource practices to their organizational performance. Huang's study shows a significant relationship between performance and the effectiveness of their HR functions, including planning, staffing, appraisal, compensation, and training and development.

Michie and Sheehan-Quinn (2001) surveyed over 200 manufacturing firms in the UK to investigate the relationship between corporate performance and the use of flexible work practices, human resource systems and industrial relations. They found that 'low-road' practices - including shortterm contracts, lack of employer commitment to job security, low levels of training and unsophisticated human resource practices - were negatively correlated with corporate performance. In contrast, they established a positive correlation between good corporate performance and 'high-road' work practices - 'high-commitment' organizations or 'transformed' workplaces. They also found that HR practices are more likely to make a contribution to competitive success when introduced as a comprehensive package, or 'bundle' of practices.

Kelliher and Riley (2002), highlighting evidence to support the view that the impact of HRM is greatest when it involves a set of coherent policies and practices, also consider that HR initiatives should be implemented as part of an integrated package. They instance functional flexibility, which leads to an intensification of work, but in the cases they studied this was less of an issue when supported by higher levels of remuneration.

Michie and Sheehan (1999) used evidence from the UK 1990 Workplace Industrial Relations Survey to show that 'low-road' HRM practices also appeared to be negatively correlated with investment in R&D and new technology. By contrast, 'high-road' work practices were positively correlated with investment in R&D and new technology. Cooke, F.L. (2001) reviewed a number of British studies on the use of 'high-road' and 'low-road' HRM strategies and concludes that high-road HRM may lead to better organizational performance. But firms do not necessarily opt for this because of the historical, social and institutional context of employment relationships in Britain.

Rondeau and Wager (2001) focused on the ability of certain 'progressive' or 'high performance' human resource management practices to enhance organizational effectiveness, noting growing evidence that the impact of various HRM practices on performance is contingent on a number of contextual factors, including workplace climate. They conducted a postal survey of 283 Canadian nursing homes which included questions about human resource practices, programmes and policies impacting on workplace climate. The survey also included a variety of performance indicators. Their results indicated that nursing homes with more 'progressive' HRM practices and which also reported a workplace climate valuing employee participation, empowerment and accountability tended to be viewed as better performers. The best performers overall were those nursing homes that had implemented more HRM practices and also reported workplace climates reflecting a strong commitment to their human resources.(...)

Greenwood (2002) reviewed the ethical position of HRM and concluded that even when judged by minimum standards, HRM is seriously lacking, not least because of a general disregard of stakeholder theory. Foote (2001) investigated the ethical behaviour of HR managers working in a sample of UK and Irish charities. The study highlights the ethical inconsistency between the application of strong, explicit organizational values to external clients and the limited influence of those values on HR strategies and practices within organizations. HR professionals no longer thought that the HRM function should be the conscience of the organization, but felt that they had a significant role in the provision of advice on ethical action to senior management.

What do people 'at the coal face' feel about the prevalence and effectiveness of human resource management? Gibb (2001) describes a survey of the views of 2632 employees on HRM in the 73 organizations for which they worked. In this study employees were found to be positive about some elements of HRM, including training and development, rewards and levels of personal motivation. They also gave high ratings for the performance of HR staff across a range of services. But the survey found negative employee views on the management of staffing levels, aspects of recruitment and retention, communication and overall levels of morale in their organizations.

Overview of HRM

• The status and significance of HRM
• HRM and globalization
• HRM and 'best practice'
• Driving forces of HRM
• The impact of HRM
• What next?