Human Resource Management and Organisational Performance: Does HRM lead to better organisational performance?

Abstract

Human Resource Management (HRM) has grown very popular over the past decades, and it is now a common characteristic for nearly all larger companies and many smaller ones. One of the reasons for this popularity is the assumption that HRM is a source for competitive advantage and will influence the organisational results and performance in a positive direction. The thesis takes a closer look at the presumed relationship between HRM and performance. The main idea behind the HRM-performance presumption is that HR practices affect the employees attitudes and behaviour, which further affects the operational performance, such as productivity, quality and innovation, which in turn have a positive on effect on the financial and market performance. A large amount of empirical evidence support such a positive relationship between HRM and organisational performance. However, there are also critics commenting on the research field s methodological limitations. Because of these methodological limitations the empirical evidence for a positive link is weakened. These limitations include: number of respondents and their role in the organisation, research design, analysis execution and interpretation, and a lack of attention to influencing variables and the possibility of a reversed relationship. The research field suffers especially from a lack of longitudinal designs and the fact that nearly all research is of a quantitative nature. In addition, some studies have found evidence indicating that the possible gains achieved through HRM can be offset by the costs related to it. Further, some researchers argue that HRM does not exclusively affect the employees in a positive way. In fact, some empirical evidence has shown that HRM can affect the employees negatively; this includes increased work intensity, stress, burn out, and ripple effects from work into private life. Through a discussion of the above-mentioned evidence, factors, and elements, the thesis concludes that it is still too early to say that HRM causes improved performance. However, the amount of empirical evidence of a positive relationship also leads this thesis to conclude that HRM can have a positive impact on performance.