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ISSN 13505084
Copyright 2006 SAGE
(London, Thousand Oaks, CA
and New Delhi)
articles
Anthony Hesketh
Lancaster University, UK
Steve Fleetwood
Lancaster University, UK
DOI: 10.1177/1350508406067009
http://org.sagepub.com
Organization 13(5)
Articles
Something is definitely going on in human resources management
(HRM). Recent debate over how best to identify and measure the key
human resource practices that generate increased organizational performance has been raging, with contributions from government, practitioner
bodies, the quality press, and consulting houses.1 Never before have
people been our most important asset as they are now. And yet despite
this, the outsourcing of HR functions enjoyed a record year in 2005 with
figures projected to rise even more sharply (Equa Terra, 2005; Davis,
2003; Nelson Hall, 2005).
Faced with the threat of being outsourced, many HR professionals have
pinned their hopes on convincing senior executives that the HR function
adds, as opposed to saps, value. Proof of this comes in the form of
research carried out by academics2 (and more recently HR consultants)
seeking to empirically demonstrate the contribution made by HRM to
organizational performancehenceforth referred to as the HRM
Performance (HRMP) link. There are, however, under-estimated and
unrecognized problems for both HR professionals and empirical
researchers. Let us briefly rehearse (some of) these problems, before
subsequently addressing them in depth.
First, empirical evidence for the existence of an HRMP link is inconclusive. Second, the non-existence of an empirical association between
HRM practices and organizational performance does not entail the nonexistence of some kind of causal connection between them. It could be
the case that a causal connection exists, but the nature of this causality is
more complex than can be captured via the usual statistical techniques.
If, as we believe, this is the case, then concluding that there is no causal
connection, simply because there is no empirical association is misleading in the extreme. Third, even if convincing empirical evidence for the
existence of an HRMP link is eventually found, a statistical association
in, and of itself, constitutes neither a theory nor an explanation.
Although some of the more sophisticated empirical researchers (Guest,
1997, 2001; Boselie et al., 2005) are aware of the lack of theory, even if
they under-estimate the scale of the problem, the lack of explanation
remains totally unrecognized.
These empirical and theoretical problems are caused, at least in part,
by a reluctance to even consider the possibility that they might have their
roots in meta-theoretical problems.3 That is, these empirical and theoretical problems might be caused by the use of what is often referred to as a
scientific approach (Boudreau and Ramstad, 1999: 343; Murphy and
Zandvakili, 2000: 93; Brown, 2004: 40) with its commitment to empirical
research techniques. Indeed, empirical researchers have tended to ignore
meta-theory altogether, strongly implying that theoretical problems will
resolve themselves via more, and better, empirical work (Becker and
Gerhart, 1996; Boudreau and Ramstad, 1999; Guest, 1997, 2001;
McMahan et al., 1999). We disagree, holding the view that although
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the seminal papers of Osterman (1994), Pfeffer (1994) and especially
Huselid (1995) as providing the solid foundations (cf. Paauwe, 2004:
534). This universalistic mode (Delery and Doty, 1996) proposes the
adoption of best practice or high performance work systems which are
not only universally applicable and successful, but should also be
evaluated or measured in terms of top-level organizational performance
(e.g. market-based measures such as Tobins q or accounting measures
such as gross rate of return on capital or GRATE), for which various
accounting analyses can be imported and applied to the field of HRM.
Prescribed HR practices differ, ranging from Pfeffers (1995) 13 interrelated practices for managing people, through Huselids (1995) high
performance work systems, to more recent attempts such as that of
Ellinger et al. (2002) to relate learning concepts to organizational performance. No matter what variation we find in the independent variables,
the dependent variables are nearly always the same, namely variations in
the publicly reported top-level financial performance of organizations.
Configurational theories differ from the assumptions held by universalistic researchers insofar as an internal consistency between HRM practices is viewed as essential to unlocking enhanced organizational
performance (e.g. Delery and Doty, 1996). In many ways, the configurational approach is an extension of contingency theory, which advocates
the utilization of different types of HR practices in accordance with the
different strategic positions adopted by organizations (e.g. Schuler and
Jackson, 1987). Nevertheless, the dependent variable of actual financial
performance is seen as the yardstick against which HR techniques,
whether universalistic, configurational, contingent, vertical or horizontally integrated, etc., and their implementation are to be measured.
Whereas the universalistic mode is often described as the black box
approach to examining the HRMP link because of its examination of the
link between various inputs (HR policies and practices) and outputs
(profits, financial performance), the contingency modes contribution to
the HRMP link is perhaps best represented by the metaphor of a Russian
doll in which the outer doll of enhanced organizational performance is
contingent on the fitting together of the inner dolls of different HR
practices. The configuration mode is illustrated by the Rubiks cube
analogy wherein a shift in the strategic orientation of an organization
(Schuler and Jackson use the examples of innovation, qualityenhancement, cost reduction, etc.) requires a concomitant shift in emphasis on specific (if sometimes wholly different) HRM practices.5
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find little resonance between the scientific claims surrounding statistical association and causality with their own organizations everyday
praxis. This is a point we shall return to below when we present our own
empirical findings.
Third, HR practices that are associated with increased performance in
one industry, occupation, location or time appear not to be associated
with increased performance in other industries, occupations, locations or
times. Indeed, to the best of our knowledge, none of the key empirical
studies has been replicated, using the same model but new data from a
later time period (Fleetwood and Hesketh, 2006). Following Sayer (2000),
we have philosophical objections to the epistemological viability of
apparent variations in the capacity of HR to drive organizational performance across different industrial sectors.
Finally, the social world is not only far more complex than this
scientific approach presupposes, but HR managers also know it is far
more complex, and implicitly reject the meta-theoretical presuppositions
of the scientific approach. If this were not the case, then HR managers
would be able to take any one of the scores of studies claiming to have
identified a relationship between some bundle of HRM practices and
performance, perhaps in a similar industry, introduce this bundle, and
expect a similar increase in performance. That experience rarely lives up
to such prediction raises important questions.
One such study often cited in defence of the scientific approachs
acknowledgement of this complexity claims to have used extensive field
work that revealed which HR policies differentiated mass and flexible
production systems most clearly (MacDuffie, 1995: 203). Crucially, the
loss of social complexity that goes with the transformation of qualities to
quantities as social phenomena are transformed into variables that facilitate statistical manipulation, leads to an inevitable trade-off:
I selected for measurement only practices that could potentially be implemented in any plant in the international sample, thus excluding practices
that are exclusively associated with one particular company or country.
(MacDuffie, 1995: 203; emphasis added)
This operationalization of HR practices represents for us an unsatisfactory trade-off in the analysis of the HRMP link. This is emphatically
recognized by the extensive literature devoted to the significance of
unique organizational practices and (often intangible) resources represented in the resource based view (Barney, 1991). Consequently, the
complex organizational processes and practices thought crucial to
enhanced performance might be overlooked in an attempt to find a statistical common denominator. But nor is it just a case of merely identifying
and then quantifying the right variables. Significant questions remain as to
whether the scientific approach reifies the significance of some (quantifiable) variables at the expense of (unquantifiable) social practices at lower
levels within organizations. We are not alone in this observation. In a
recent review of the HRMP literature, Pauwee (2004: 55) notes: to date
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freedom to deliberate or choose in accordance with individual psychology rather than, on one hand, as irrational, automatic rule-followers or
totally encapsulated in an externally defined role or, on the other hand,
rational in the sense of isolated maximizing economic man. Third, they
emphasize the constitutive importance of the cultural and cognitive
framework. Finally, they recognize the central and pervasive role of
power and conflict.
One reason to doubt the affinity between critical realism and Institutionalism, is that critical realists tend not to use the term institution.
This is, however, largely because they tend to favour the term social
structures. This difference is largely semantic because there is general
agreement that institutions are a specific kind of social structure. Institutions according to Hodgson, are the kind of structures that matter most
in the social realm . . . (Hodgson, 2005: 2; see also Lawson, 2005). All
this suggests that the critical realist meta-theory may well provide an
appropriate meta-theoretical underpinning to Institutionalist theory. This
raises the following question: how might Institutionalist theory utilize
critical realist meta-theory?
All theory (consciously and explicitly or unconsciously and implicitly)
employs meta-theory. If a meta-theory is not consciously or explicitly
selected, then a meta-theory will be implicitly or unconsciously presupposed anyway. It seems entirely reasonable to suggest that appropriate meta-theory should be carefully considered and selected such that
it is consistent with the theory rather than simply allow theory to be
informed by meta-theoretical happenchance. Indeed, Nielsens paper
demonstrates that errors creep into Institutionalist theory precisely
because inappropriate meta-theory is implicitly or unconsciously presupposed. Let us consider an example closer to home.
Working within the Institutionalist tradition, Ramsay et al. (2000)
consider the possibility that the enhanced organizational performance
associated with high performance work systems is caused by work
intensification, offloading of tasks, controls and increased job strain
something they refer to as the Labour Process model. The conclusion of
their paper, however, runs into a contradiction, arguably, meta-theoretical
in nature. None of the models they test provide an adequate account of
the outcomes of high performance work systems. Although they reject the
possibilities that the data are problematic because they are based on the
respected WERS 98 data, and that the statistical models are problematic
because they encapsulate established measures that have been tested
previously, they overlook the possibility that this entire scientific
approach is wanting. Indeed, they recognize that:
The statistical models of the relationships between employees responses to
HPWS [high performance work systems] practices, employee response and
organizational outcome used in the analysis are perhaps too simplistic to
capture the complex reality of the implementation of the operation of
HPWS . . . It is quite plausible that outcomes flowing from managerial
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Critical Realism
Critical realism is a meta-theory rooted in ontology. Critical realists have
made headway in recent years in developing a social ontology, namely a
set of very abstract statements about the way the social world is (its being
if you like) and, from this, have derived methodological commitments.
Let us start with ontology and work our way to methodology.
The social world consists of human agents and social structuresby
which we mean institutions, mechanisms, resources, rules, conventions,
habits, procedures, and so on. This has been discussed since the 1980s in
social theory under the agencystructure framework, although critical
realists have done much to develop this framework recently (Archer, 1995;
Stones, 2005). Notably, critical realists emphasize the transformational
nature of the social world, whereby agents draw upon social structures
(etc.) and, in so doing, reproduce and transform these same structures.
As is now well known, critical realists make great play of open and
closed systems. Systems are defined as closed when they are characterized by event regularities, and open when they lack event regularity,
where an event regularity is styled as: whenever events x1, x2, . . . xn then
event y or in stochastic form, whenever events x1, x2, . . . xn on average,
then event y on average. Event regularities are also styled as: y = f(x1 . . .
xn) and form the basis upon which any mathematical or econometric
specification is derived. However, event regularities, and hence closed
systems, are extremely rare phenomena, especially in the social world.
Presupposing closure when the social world appears to be open, therefore, initiates a series of problems that we cannot go into here (cf.
Lawson, 1997; Fleetwood, 2001). Does empirical research on the HRMP
link presuppose a closed system? In a word, yes. To suggest, as the
literature overwhelmingly tries to, that some HRM practices are statistically associated with increased performance, is to assume regularity
and hence closure.
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Because the entity usually does whatever it does in virtue of the interaction of the totality of causal components, we need a term to refer to
them as a whole. The term we use is a generative ensemble.
We can think of the firm as a generative ensemble that enables or
causes the production of goods and services. Or we can think of the
workplace, the shopfloor, the work-system or the team, as a complex web
of interlocking generative ensembles, sub-configurations, sub-subconfigurations, and so on. Just-in-time production, for example, is possible because the sub-configuration that enables inventory interlocks with
the sub-configuration that enables distribution within the plant. The subconfiguration that causes distribution within the plant interlocks with the
sub-sub-configuration that consists of the maintenance of fork-lift trucks.
Much depends upon the questions we are asking, and the level of
abstraction we are using. Certain business processes manifest themselves
as sub-configurations more readily than others. Rarely, however, do such
configurations, sub-configurations and sub-sub configurations lend themselves to measurement. This complexity is routinely overlooked by the
HRMP literature that often utilizes simplistic and overarching HR
structures as proxies, thereby ignoring the influential and complex
underlying causal mechanisms at work in the social processes underpinning such HR work practices.
From our interviews with senior HR managers and function directors
(now totalling over 70), we found clear parallels between our notion of
generative ensemble with the ways in which practitioners understood
and conceptualized their day-to-day activities:
When Im working on the implementation of [HR] processes I find myself
thinking about the orchestra analogy. You know, like a conductor. The
conductor plays no instrument and makes no sound, but without a
conductor youre just going to get a cacophony of noise rather than
something which conforms to a score. Your [High Performance Work
Systems] are the score which describes, or denotes, what the thing should
sound like in the end, and the implementation [of HR processes] is the
conductor. And if youre trying to evaluate different sections of the
orchestra and how well do they work, the answer is it doesnt all depend
on the score. If you have a score that actually doesnt have any brass in it,
you cant say the brass section is pretty crap because theyre not making
much noise. The score simply doesnt call for that. When one is trying to
evaluate the whole impact of HR one very much has to take into consideration the whole score. Some things are very much in the fray, and others
arent called for very much. You will bring in things in operations which
can make a difference, and then afterwards the effect might be quite
muted. (HR Director; emphasis added)
Powers
Entities (including humans and social structures) possess powers, that is,
dispositions, capacities and potentials to cause certain things, but not
others. Gunpowder, for example, has the power to explode, but not to
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Powers are possessed by workers in virtue of their biological, physiological, psychological and social make upalthough it is important to
note that these levels are irreducible to one another so we cannot simply
reduce social behaviour to biology. Unlike most animals, humans do not
just execute genetically pre-programmed tasks; they conceive these tasks
firstalthough there may be a complex and recursive process between
conception and execution. The power of conception is of crucial importance here because it consists of the powers of imagination, ingenuity and
creativity that conceived of the Pyramids, the Guggenheim, the cart, the
MIR space station, surgical tools, nuclear weapons, and the HR business
partner. These same powers of imagination, ingenuity and creativity are
also exercised in the conception of less grandiose endeavours such as
finding better ways of producing a rivet, writing a programme or engaging
in a telephone conversation. HRM practices such as performance management, retention, job design, and especially engagement, along with
schemes to increase employee participation and empowered employees,
are designed to unleash and harness the powers of imagination, ingenuity, customer service and creativity that workers bring with them to the
work place. If workers did not have these powers there would be no point
whatsoever in even contemplating HRM practices. Indeed, the sub-title of
Pfeffers (1994) book Unleashing the Power of the Workforce captures the
point beautifully. The fact that HRM has not succeeded in unlocking
workers powers does not mean they do not exist: something could be
counteracting these powers. Or, alternatively, these powers may well
have been unleashed: that theyor their impactcannot be statistically
captured does not preclude their existence.
Tendencies
The term tendency refers to a force. Metaphorically speaking, a force
drives, propels, pushes, thrusts, asserts pressure and so on. Perhaps the
most important point to note about a tendency is that it refers not to any
outcome or result of some acting force, such as a regularity or pattern in
the resulting flux of events, but to the force itself. A tendency should not,
therefore, be (mis)understood as some kind of rough and ready event
regularity or law, nor as a stochastic regularity.8
Now, to write that a configuration has a tendency to x, does not mean
that it will x. In an open system, configurations do not exist in isolation
from one other, rather there is a multiplicity of such configurations each
with their own tendencies and these tendencies converge in some space
time location. The relation between configuration and tendency might be
characterized as follows. The configuration does not always bring about
certain effects, but it has a tendency to cause them. Hence, it acts transfactually. Configurations continue to cause the flux of events, irrespective of
the conditions under which they are said to operate. We do not say of a
transfactually acting configuration that it would bring about certain events
if certain conditions prevail, or ceteris paribus. Rather, the configuration
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Clearly, these examples are not exhaustive but they are indicative of
many of the accounts we heard. Furthermore, all of the causal phenomena identified in the examples we provide could be broken down into
their components as we try to provide more detailed information.9
Needless to say, a great deal of this information will be irreducibly
qualitative. All this information adds to the richness of the explanation
and is therefore not superfluous but absolutely necessary. There is little
doubt that most of us would recognize this information immediately as
constituting a robust explanation because it would (at least to some
degree) answer the question Why?.
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numerous black ravens to a theory of a mechanism intrinsic . . . to ravens
which disposes them to be black. (Lawson, 1997: 24)
Reflexive Performance
According to one of the leading critical realists, Archer (2003), individuals often engage in a specific agential enterprise which she refers to as
a project. When deliberating over a project, agents engage in a process of
reflexive determination, which refers to the personal process undertaken by individuals in identifying the causal mechanisms linking structure to their agency. What we call reflexive performance, involves agents
not only identifying the structures, institutions, mechanisms, rules,
resources, etc., deemed to enable or constrain wider organizational
performance, but also constructing strategies to use them to pursue their
personal goals. No social structure (etc.) is constraining or causal tout
court. Whether social structures enable or constrain depends upon the
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labelled self knowledge (what one knows and thinks), societal knowledge
(knowing what others think), a stance (the adoption of a position of what
one wants to achieve) and the legitimacy of this agential project underpinned by the accompanying explanations to justify ones project to
oneself. Here, at last, we move away from scientific notions of causality
(as event regularity) to the genuine interplay between subjective properties (discursive penetration through the internal conversation) and objective structures (organizational successes, failures, good performance,
bad performance, etc.). People, their diagnoses and their actions, then,
are as influential and important for analysis, as the structures and
institutions they necessarily engage with. That said, institutions and their
environments play a major role in shaping how the causal role of HR is
perceived and explained. Moreover, even when individuals, and in the
case of the example below, very powerful individuals have one view of
how the HRMP link should be understood, institutional isomorphism
takes over:
Im alarmed at the time devoted to financials by HR. [. . .] There are
measures that we are immersed in, dissecting every dollar for the CEO
whose focus is on the score and on the numbers. Nothing else here appears
to matter. (HR Director)
Conclusion
Although the scientific approach, with its commitment to empirical
research techniques, might be a useful starting point for understanding
the HRMP link, it is currently treated as the end game. We suggest that
critical realism, by offering a more fruitful meta-theory, can play a
significant part in developing an understanding to the causal role played
by HR in organizational performance. But we do not live in a social
vacuum; this much has been revealed to us in our ongoing work with HR
directors, who may well (implicitly) subscribe to much of the metatheory we propose here, but have to implement it in the real-world
institutions in which our research took place. It is for this reason that we
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Notes
1
6
7
8
9
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10
This sketch is, of course, at a very high level of abstraction. The point is to
illustrate how we might go about using the meta-theoretical concepts known
to critical realism to generate a tendential prediction.
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