HRM and Performance: Achievements, Methodological Issues and Prospects

Twenty years ago Guest (1987) published his normative framework describing the essence of HRM. He presented HRM as a new approach to personnel management, emphasizing its strategic contribution, its closer alignment to business, the involvement of line management, and focusing on HRM outcomes like commitment, flexibility and quality. The achievement of these human resource outcomes was, in turn, expected to contribute to a range of positive organizational outcomes, including high job performance, low turnover, low absence and high cost-effectiveness through the full utilization of employees, now relabelled as human resources. Put this way, it is not difficult to understand the wide appeal that the notion of HRM had (and still has) to academics and practitioners alike. It led to the renaming of chairs/departments within universities and to changed job titles in the business community. The attractiveness of the concept of HRM increased considerably when Huselid, in 1995, published a ground-breaking paper in the Academy of Management Journal in which he demonstrated a correlation between the degree of sophistication of HR-systems and the market value per employee among a range of publicly quoted companies in the USA. The paper generated admiration, criticism and an abundance of ‘me too’ research, trying to replicate the proclaimed relationship between HRM and Performance (Delery and Doty, 1996; Guthrie, 2001; Koch and McGrath, 1996; Wright et al., 2003). Since then many academics on both sides of the Atlantic have become active in this field, with a special focus on the relationship between HRM and Performance. Within this rapidly expanding field of study, the HRM–Performance relationship has been approached from a variety of perspectives rooted in organizational behaviour, sociology, economics, industrial relations and organizational psychology, with a particular emphasis placed on the impact of various combinations of human resource practices on a range of performance outcomes at the individual and organizational level of analysis. Below I will first discuss the achievements so far in this new field of research (second section). In the third section I then highlight some of the pitfalls and methodological problems associated with trying to establish a link between HRM policies and practices and performance, and the kind of solutions being put forward in the literature. I conclude by presenting the prospects for future research in the area of HRM and performance, arguing, in particular, for a more balanced approach that pays equal attention both to the managerial, functionalist perspective and to the concerns, involvement, and well-being of employees. This implies a more central position of the employment relationship in the equation between HRM and performance, as well as a multidimensional perspective on the notion of performance itself. Before presenting an overview of achievements, methodological problems and prospects for the future, I would like to make a few necessary remarks on the nature and definition of HRM. We can consider the very concept of HRM as a new, special approach to personnel management (see, for example, Guest, 1987; Storey, 1992, 1995), which can be distinguished from traditional conceptions of personnel management. That kind of debate took place mainly in the UK and involved a number of academics like Guest, Storey, Legge and Keenoy. The latter reserves the term ‘HRMism’ for all the different meanings and practices associated with HR initiatives (Keenoy, 1997). Here, however, I opt for a different approach which treats HRM as an evolving field of academic inquiry focusing on the study of the employment relationship and of the way in which people are managed at work. A more specific definition is difficult to give as it is dependent on time and context, just like the related field of organizational studies. For example, the advent of network organizations, the growth of knowledge workers, and the development of non-standard employment contracts have all had major implications for the way people are managed in contemporary organizations, meaning that the very object of study that is at the heart of HRM, is itself subject to change. At the same time, this means that this is a very vibrant field of study, one that brings together researchers with a background in industrial psychology, organizational behaviour, industrial relations, sociology and economics (see Boxall et al., 2007). As an academic area of inquiry, HRM comprises a thriving international community of scholars, is one of the largest divisions of the American Academy of Management with more than 3000 members, and involves a range of well-established major national and international annual conferences, workshops and symposia. Participating academics publish both in specialized HRM journals and in more general top-tier management, organizational behaviour (OB) and industrial relations (IR) journals. Moreover, we see across the world established chairs and departments of HRM with thriving doctoral, masters and even undergraduate programmes in the area. All these individuals, groups and networks of scholars are addressing a wide range of issues in the field of HRM. They do this using different methods, ranging from highly sophisticated quantitative multi-level (see Becker and Gerhart, 1996; Becker and Huselid, 1998; Gerhart et al., 2000), or tree analysis (Guest et al., 2004), to in-depth case-studies aimed at understanding the underlying processes and mechanisms (see Hesketh and Fleetwood, 2006). The field is in constant development, and is involved in discovering new problems, new issues and, once in a while, generating solutions and new insights. This is just like in any other established (applied) discipline like Marketing, Finance or Strategic Management, which are not, however, commonly labelled with the add-on ‘ism’ (explain in relation to earlier cite of Keenoy, 1997) and for which we do not normally discuss the need for a new name or for discarding the old one. HRM, whether we like it or not, is here to stay and will continue to stay. Initially – especially in the UK – the discussion focused on the differences between HRM and personnel management and on the implications of a unitarist and managerial approach to the management of people. Would HRM endanger the very existence of trade unions? Could it, as a normative construct, be characterized as being anti-union? Writers like Guest, Storey, Purcell, Tyson and Keenoy were amongst the most active in this debate. The debate culminated in Karen Legge's (1995) contribution, Human Resource Management: Rhetorics and Reality, which in hindsight became a classic. This kind of debate hardly took place in the USA. On the contrary; in the USA researchers were busy carrying out empirical research aimed at providing evidence on the role of HRM in generating added value. In this they drew their inspiration from two competing would-be classics in the area published in the mid 1980s. One was Beer et al.'s (1984) book representing the more systems and stakeholder oriented Harvard approach to HRM; the other was Fombrun et al.'s book, also published in 1984, representing the more functional, managerial approach of the so-called Michigan school of HRM. The first systematic empirical studies of the HRM–Performance link were published in 1994 (Arthur, 1994; Osterman, 1994) and 1995 (MacDuffie, 1995), including one of the most cited articles in this area by Huselid (1995). Huselid's study marked a turning point because from then on the dominant theme in HRM research on both sides of the Atlantic became the relationship with performance. In the years that followed, many articles were published which presented evidence on the performance effects not only of single practices like personnel planning (Koch and McGrath, 1996), performance related pay (Dowling and Richardson, 1997; Lazear, 1996; McNabb and Whitfield, 1997), training and development (Kalleberg and Moody, 1994), and internal career possibilities (Verburg, 1998), but also of bundles or combinations of HR practices (e.g. Arthur, 1994; Guest et al., 2004). In 1997 Paauwe and Richardson presented a summarizing framework encompassing more than 30 different studies, which substantiated and corroborated the relationship first, between a range of HR practices, and important HRM outcomes, such as satisfaction, motivation, turnover, absenteeism and commitment, and second, between these outcomes and more general performance outcomes at the organizational level, like productivity, quality, R and the overview by and 2006). Hesketh and for example, conclude that empirical evidence for the existence of an HRM–Performance link is a and of a theory an Guest had this in 1997 by that he was the absence of which a of empirical we are to on understanding of the impact of HRM on performance, we need a theory HRM, a theory performance and a theory they are This is a plea which is by Legge in the to Below I first focus on theory that is of providing the necessary I then discuss the link with performance, and what we mean by HRM and we years the 1997 Guest the overview by et al. some not the of empirical they conclude that the most commonly are resource and the theory and are both at the organizational level, the framework on the of account variables at the individual level like and their and their to different in HRM theory and focus on the of HRM at the organizational level and are mainly in its performance effects from a business the framework an established its in on the two of analysis and number of practices or systems of HR Wright and the of the between what they HR research the more focused of and research, a more oriented of HRM and focusing on the of single or practices on in turn, implies a need to multi-level like and (see Klein and Kozlowski, Wright and of the different of analysis are through using the concept of the as demonstrated by (1995) and Guest are the and of HRM et al., Guest this by presenting the of a which the number of HR practices and the of a high involvement in a more positive and in turn, satisfaction, job and motivation, as well as of at this line of Wright and a for making a between HR practices on a strategic – or – HR practices for example, the and HR practices by the the equation between HRM and various of both individual and organizational level outcomes, including performance, is a for the field as a It is also a way of to the criticism of like Legge Keenoy (1997) and the focus of of the on HRM. In with respect to which link HR to performance, the field has from in the in which HR practices were or to to of performance, to far more of and the of to these more sophisticated of the relationship between HRM and performance is the that HR practices at the organizational level the and behaviour of at the individual level in turn, key level or HR outcomes such as and impact organizational or an approach involves multi-level of in that it to link across different of from the organizational level (e.g. systems of HR to individual level (e.g. employee and and to the organizational level (e.g. organizational and firm multi-level to be by more of analysis for a wide range of of this of approach can be in a study by Wright et al. which not only an overview of the various methodological pitfalls in HRM and Performance research, but also solutions and their value by in the study itself. is still that to be both in of the HRM–Performance relationship and in of more with more the that are being in the area is of still and but a it is of up in a of the The performance outcomes of HRM can be in a variety of We a from and outcomes (e.g. sales, market outcomes (e.g. such as productivity, quality, outcomes (e.g. and among employees, such as satisfaction, commitment, to on the overview by et al. we can conclude that are in of all articles included in their analysis. is the most by various of this is as can be by a range of internal and which have to do with and their related or with the human As by and Guest the between some of the performance (e.g. market and HR is and subject to other business (e.g. research and development For example, policies for can but it has to do with the proclaimed of HR practices from the we are in need of performance that are far more in of what HR practices can such as for example, in employee commitment, and behaviour and in outcomes at organizational level (e.g. and of The of even more we a closer at an analysis out by Wright et al. empirical studies that the relationship between a of HR practices and organizational level performance. far the of studies a labelled because it HR practices the performance in practices past et al., a few studies the of HR practices on performance in the way by HR practices at one point in time and to performance (e.g. Huselid, et al., This means that the of studies have a very for and Wright and Wright et al., we are in need of studies with the research that are to link HR practices both to past performance order to whether that past performance HR and to performance order to whether HR practices are related to studies by Guest et al. and Wright et al. do for both past and performance and, in so that HR practices are related to future performance, but that they are also related to past performance. Wright et al. that the among both academics and practitioners in making any now on we not have to researchers to pay attention to the of the of at the very heart of research this not only implies at in time and analysis on the of competing and but also as Wright et al. the of so-called third (e.g. organizational the of et al., as well as so-called as by and Wright, In the I that the field of HRM on the study of the employment relationship and is involved in the management of people. In this is a field of inquiry that to a number of related academics with different all to have their way of HRM and, more also their way of the concept in of a range of HR There to be on the nature of HRM and that et al. are to an variety of different practices being in the studies they There is single or of HR practices or systems of practices that are to or human resource management. In et al. as many as different practices that are in different studies, of which the in order of are training and development, pay and performance management and and practices can be to the of the of HRM programmes (e.g. to and with the and to their the performance and well for or This is a of practices that to so-called or Performance systems and which more or some of the key practices commonly associated with we all the articles published more than have of theory and we are the of at a HRM is when the relationship between HRM and performance. is still to the HR practices for example, the of a the of of the across different employee or of the of of the is also the of which job the HR practices are related to and what kind of are well to give a both and on the of the HR practices involved and the way in which they are being Wright and Gardner an of these including to focus on one job using can we the field of HRM and performance, which has a we that many research are far from to the that they are driven by the kind of that can be or that are publicly and Wright, It is to of better research but the kind of are not or time and are In this context, for example, it is the by and make a plea for what they in order to with high and on a and, of with for which they to need approach is that by Hesketh and make a plea for more in-depth and case-studies in order to the underlying and mechanisms in the practices underlying the HR This is in line with plea for a more approach to the analysis of HRM. an approach is central to the so-called theory of human (see with and systems approach to HRM, on the theory of human also to focus attention on the that help to systems of HR practices in contemporary As it to attention from an with the performance effects of HRM to the and development of HRM systems This is a important this has been a area of inquiry in the field of HRM, as also by Legge from an and approach implies account a the and its related the trade and so of which is to put forward their and their of and of performance. a stakeholder of HRM and performance is in line with the of Beer et al. It implies from an with of performance, such as productivity, and to a definition that account performance in for example, of and and Purcell, as well as of various of employee such as satisfaction, and and job Guest, 2004). the of such a perspective would a way to the managerial and unitarist approach which has characterized the of HRM and performance research of the past In particular, it would help to research in the area by the more traditional unitarist with a more perspective that for and value systems across different stakeholder groups and, therefore, for different and of the and of HR In other in of the HRM–Performance such a stakeholder perspective would help to focus attention on performance in the multidimensional meaning of the Moreover, it is also a way of the more multi-level with their focus on the between and organizational level to a level of including and at this level as well will important issues and of and A but the role that in the HRM and performance research this kind of research or different on the of or and and then to link these to HR however, research in this area has to evidence that HR practices to to organizational performance and Huselid, Purcell, with to research by Becker and Huselid, 1998; and Doty, 1996; Huselid, both and Becker and Huselid the of which is in line with within the field of strategic management itself that is more focused on like and strategic and, therefore, (see, for example, Becker and Huselid in see as the key between the HR and firm performance. of trying to link the HR to one of the market they the linkage between strategic business processes and the HR Paauwe one by making a plea for HRM as an for a range of strategic implies that the HR is the development of a with a degree of to a range of strategic This high employees, they need to be to and a to and to be and this is only once the has of and has that they are and with for their the HRM be not only added but also on It with The latter to and with both internal and on of and to the approach to the management of human that is very focused generating added the kind of or HRM here can be expected to major to all including and their and the This is from point of the of like and in essence implies people which in employee satisfaction, to stay with the and it be are the kind of HR outcomes that have been in many of the HRM–Performance that have been and in the the past on an analysis of has whether the of HR practices that are for management, from the point of of productivity, for example, are also for in for of their This important between organizational performance and employee well-being in contemporary organizations, and the role that HRM in such 2004). This attention it between more to the management of people and the kind of approach The of the for management as well as for and other are only now to be by researchers in the area. the of the issues this is a for future I in doubt, however, that the approach being here an important way forward for the field of HRM in general and for the analysis of the HRM–Performance relationship in What I have to do in this is a of a and rapidly expanding and developing field of research which has established itself by like business studies, economics, psychology, organizational behaviour, sociology, industrial relations and the on these HRM, as a field of study, is generating research and frameworks of its that are being and using a range of both quantitative and and on a variety of and methodological This is a vibrant field of inquiry with an and number of At the same time, it is important to that this is a field of like all new of inquiry have been important that have been the past as is to be still to be I would like to Wright, and Wright for their in developing this