1. HRM and Performance. Peccei, R. & Van De Voorde, K. (2014)
Evidence about the HRM-Performance Relationship
Evidence supports the idea of a positive relationship between HRM and performance. Three meta-
analyses examined the relationship between various measures of HRM and a range of performance
outcomes. The HRM measures included both an overall index of high performance work practices
(HPWP) and more specific bundles of skill-enhancing, motivation-enhancing and
opportunity/empowerment-enhancing HR practices. The main results are consistent for all three.
HRM Bundles and Systems
Researchers attempted to understand the HRM-performance relationship by disaggregating the more
general HRM construct and focusing on the effects that more specific bundles and systems of HR
practices have on performance. The more general systems of HRM that have received the greatest
attention in HRM-performance research are so-called High Performance Work Systems (HPWS), High
Commitment and High Involvement models of HRM.
HPWS models argued an internally coherent and self-reinforcing set of ‘progressive’ HR practices in the
areas of selection, training, performance management, rewards, job design, communication and so on that
taken together can be expected to make a positive contribution to organizational performance. HPWS are
positively related to performance.
Performance Dimensions
HRM-performance relationship has evolved through a decomposition of the dependent performance
variable into a number of more specific individual and organizational outcomes. Two developments:
Early distinction between different aspects or dimensions of organizational performance.
Distinction between more proximal operational outcomes (e.g. absence, turnover, productivity
and quality) and more distal outcomes covering aspects of the overall financial and market
performance of the organization (e.g. accounting and market returns, and growth). Operational
outcomes are more closely and directly linked to the HR practices.
Growing concern to ‘build the worker into ‘HRM’ to apply a more behavioral perspective and to
examine the effects that HR practices have not only on various aspects of organizational
performance, but also on employee well-being, attitudes and behavior at work. Led to
increasingly important stream of research, concerned with the link between HRM, employee
well-being (WB) and organizational performance (OP).
Important is the comparison between various versions of so-called mutual gains versus conflicting
outcomes models. Mutual gains models suggest that HRM has a positive effect on both employee well-
being and organizational performance, while competing outcomes models suggested that while HRM has
a positive impact on performance, it has a negative or no effect on well-being. There is a greater empirical
support for mutual gains.
Mediators (Theoretical Explanations) of the HRM-Performance Relationship
A key criticism of early research in the area was to address the so-called ‘block box’ problem and the core
question of the underlying theoretical mechanisms through which HRM affects performance. Reviewing
HRM and performance research, Boselie et al. (2005) concluded that the resource based view (RBV) of
the firm and the AMO-framework dominate this field. The RBV perspective argues that organizations can
build competitive advantage based on valuable, rare, inimitable, and non-substitutable resources. RBV
consists of human capital advantage and human process advantage. HR practices can improve
organizational performance by strengthening relationships and coordination between employees.
AMO argues that bundles of HR practices positively influence organizational performance by enhancing
employee skills, competencies and abilities (A), by stimulating employee motivation and commitment
(M), and by providing skilled and motivated employees with the opportunity to perform (O).
,Bowen and Osroff proposed that HRM system strength can create strong, focused organizational climates
that help to structure and direct employee effort and behavior towards the achievement of key desired
organizational goals.
Process models represent a further refinement and extension of the proposed underlying causal chain
linking HR practices to final organizational outcomes that view employee attributions, experiences,
attitudes and behaviors as the first key links in the overall HRM-performance relationship.
Moderators of the HRM-Performance Relationship
The conditions under which particular bundles and systems of HRM are likely to have an effect on
various aspects of performance. Two main approaches:
Best practices perspective according to which there are internally coherent sets of HR practices,
such as HPWS or high commitment models of HRM that are universally valid and effective,
irrespective of the situation.
Alternative contingency perspective suggests that the effectiveness of given HRM models is
likely to vary depending on the particular context or situation involved.
Moderator is the overall strategy of the organization. Organizational performance depends on the extent to
which particular systems of HRM fit the dominant strategy adopted by the organization.
Employee age moderates the effect on HRM on aspects of employee well-being. Because of different
priorities at work, development-oriented practices (e.g. training) and maintenance-oriented practices (e.g.
job security) have a stronger positive effect on younger and older workers respectively.
Multilevel Approaches to the HRM-Performance Relationship
Multilevel models have the distinguishing feature that they incorporate at least one mediator (e.g.
employee attitudes or behavior) of the HRM0performance relation and that the independent (HRM),
dependent (performance), and mediating constructs in the model reside at different (e.g. individual vs.
work unit or organizational) levels of analysis.
A small number of recent studies in the area by:
1. Highlighting the centrality of emergent bottom-up compilation processes in the development of
complex models of the HRM-performance relationship;
2. Extending standard multilevel models from two to three levels in order better to incorporate
workforce differentiation issues in the analysis of the HRM performance relationship;
3. Extending existing multilevel mediation models to a full 2-1-1-2 format explicitly designed to
capture a range of both upward and downward cross-level mediation effects linked to employee
attitudes and behavior in the HRM-performance relationship.
Further Research
HRM is positively associated with organizational performance;
The conceptualization and measurement of HR practices and systems requires further attention;
Positive and negative effects that HRM systems can have on employee experiences and well-
being, and on how this, in turn, can affect employee attitudes and behavior and ultimately,
therefore, organizational performance.
How the effects of HRM on both employee and organizational outcomes are conditioned by the
wider institutional and organizational context.
More longitudinal studies with a multilevel approach.
,2. How Does Human Resource Management Influence Organizational
Outcomes? A Meta-Analytic Investigation of Mediating Mechanisms. Jiang,
Lepak, Hu & Baer, (2012)
The primary objective of this study is to develop an integrative model of the mechanisms mediating
between HRM and organizational outcomes through a meta-analytic approach.
Theoretical Background and Hypotheses
Existing Theories and Research on Relationships between HRM and Organizational Outcomes
Three groups of organizational outcomes:
1. HR outcomes: refer to those most directly related to HRM in an organization, such as employee
skills and abilities, employee attitudes and behaviors, and turnover.
2. Operational outcomes: those related to the goals of an organizational operation, including
productivity, product quality, quality of service, and innovation.
3. Financial outcomes: reflect the fulfillment of the economic goals of organizations. Typical
financial outcomes include sales growth, return on invested capital, and return on assets.
In this study, we use organizational outcomes to refer to all three categories of outcomes.
Behavioral perspective of HRM: organizations do not perform themselves, but instead use HR practices
to encourage productive behaviors from employees and thus to achieve desirable operational and financial
objectives.
Human capital theory: human capital – the composition of employee skills, knowledge, and abilities – is
a central driver of organizational performance when the return on investment in human capital exceeds
labor costs.
Resource-based view: why human capital can help firms to outpace competitors and proposes that
organizations obtain a competitive advantage from resources that are rare, valuable, inimitable, and non-
substitutable.
Decomposing HR Systems into Three HR Dimensions
AMO-model: ability, motivation, and opportunity. Three primary dimensions:
Skill-enhancing HR practices: designed to ensure appropriately skilled employees; they include
comprehensive recruitment, rigorous selection, and extensive training.
Motivation-enhancing HR practices: implemented to enhance employee motivation. Typical
ones include developmental performance management, competitive compensation, incentives and
rewards, extensive benefits, promotion and career development, and job security.
Opportunity-enhancing HR practices: designed to empower employees to use their skills and
motivation to achieve organizational objectives. Practices such as flexible job design, work
teams, employee involvement, and information sharing are generally used to offer these
opportunities.
Linking HR Dimensions to Multiple Outcomes
HR outcomes can conceptually be divided into human capital, motivation and opportunity to contribute.
Human capital: employees’ knowledge, skills and abilities.
Employee motivation: direction, intensity, and duration of employees’ effort as manifested by positive
work attitudes (collective job satisfaction, commitment, perceived organizational support) and work
behaviors (organizational citizenship behavior).
We expect that skill-enhancing HR practices will likely have a stronger impact on human capital and a
weaker impact on employee motivation. The three dimensions of HR are positively related to employee
motivation to different degrees.
, Motivation-enhancing HR practices are more likely to provide employees with extrinsic motivation.
Work teams, employee involvement, and flexible job design help to generate employees’ intrinsic
motivation, which encourages them to seek out challenges at work.
Skill-enhancing HR practices are less positively related to employee motivation, because they have an
indirect effect.
We propose that human capital and employee motivation mediate the relationships between the three HR
dimensions and more distal outcomes related to voluntary turnover (voluntary organizational exit),
operational outcomes, and subsequent financial outcomes.
With high-quality human capital pools, organizations are more likely to achieve operational goals such as
high productivity and quality, great service, and innovation. Positive work attitudes (e.g., collective
commitment) and positive perceptions of a work environment (e.g., perceived organizational support)
mediate the relationships between high-performance work systems and operational outcomes.
Organizations need some level of voluntary turnover. This is because employees who do not fit their
jobs will self-select out of organizations, which also need new employees to provide fresh stimulus.
Expected is a negative relationship between voluntary turnover and financial performance, but a positive
relationship between operational and financial outcomes.
Discussion
HRM positively relates to financial performance both by encouraging desired employee
behaviors and by building a valuable human capital pool.
HRM first relates to proximal outcomes, which further relate to distal outcomes. The
relationships between HRM and distal outcomes (e.g., operational and financial outcomes) could
be mediated through multiple pathways (e.g., through human capital and employee motivation)
Direct relationships between skill-enhancing HR practices and motivation-enhancing HR
practices and financial outcomes that could not be explained by the mediating process.
Skill-enhancing HR practices were more effective in enhancing human capital, whereas
motivation-enhancing HR practices and opportunity-enhancing HR practices were more likely to
improve employee motivation.
If all three dimensions of HR systems have unique effects on organizational outcomes, failure to
include any dimension may compromise the overall impact of HR systems on organizational
outcomes or at least lead to inaccurate results.
Investment in three HR dimensions was associated with the increase in financial outcomes.
To retain talented employees and realize operational and financial objectives, organizations need
to use HR practices to enhance both employee skills and motivation at work. More specifically,
we suggest that organizations focus more on practices, such as recruitment, selection, and training
when enhancing employee skills.
