The practice areas covered by SHRM that impact on performance are summarized in Table 5.2.
HRM and performance
- ‘The distinctive feature of HRM is its assumption that improved performance is achieved through the people in the organization’ (Guest, 1997).
- If appropriate HR policies and processes are introduced, it may also be assumed that HRM will improve firm performance.
- HR professionals need to be able to explain how and why HR practices lead to their outcomes.
The concept of performance covers both what has been achieved and how it has been achieved.
Research on the HR/performance link
A number of research studies have revealed that there is a link between certain HR practices and whatever criteria were used to indicate the level of performance. ‘At present the studies report a promising association between HRM and outcomes, but we are not yet in a position to assert cause and effect’ (Guest, 1997).
How HR affects performance
- ‘The assumption is that “appropriate” HRM practices tap the motivation and commitment of employees’ (Guest, 1997).
- The conclusion reached by Purcell et al’s (2003) research was that HR practice feeds in as an ‘ingredient’ in the workplace and,through various mechanisms, feeds out through the other side as improved performance.
- ‘There is clear evidence of a link between positive attitudes to HR policies and practices, levels of satisfaction, motivation and commitment and operational performance’ (Purcell et al, 2003).
Any theory about the impact of HRM on organizational performance is based on three propositions: (1) that HR practices can enable the organization to attract and retain the skilled and engaged people it needs and make a direct impact on employee characteristics such as engagement, discretionary behaviour and cooperation; (2) that if employees have these characteristics it is probable that organizational performance in terms of productivity, quality and levels of customer satisfaction will improve; and (3) if such aspects of organizational performance improve, the business performance measured by sales, profits, market share and market value will also improve.