Human Resource Management and Firm Performance: Testing a Contingency Model of Executive Controls

This study examined the relationship between human resource management (HRM) controls used by executives and changes in the financial performance of their firms (ROA and sales growth). Results from 102 single product firms indicate that, as hypothesized, when the approach to HRM was based on behavior control, firm performance was higher when executives had complete knowledge of cause-effect relations. HRM based on output control had neither a direct nor a moderating effect on firm performance. When the approach to HRM was based on input control, performance was higher when standards of desirability were ambiguous. From a practical standpoint, these findings suggest that executives should be cognizant of several contingencies that might guide their choice among various approaches to HRM, as well as the effects these choices have on the performance of their firms. From a research standpoint, there are several issues raised in this study that suggest avenues for future investigation on HRM, control, and performance.