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Table of Contents:

I. II.

Introduction.........1 Literature Review.........................2 1.1 Human Resource Management and Organizational Performance.2 1.2 The Perspectives of Human Resource Management.....................................5 Conclusion6


Abstract: The fallowing research paper was undertakes in order to acknowledges whether there is indeed a correlation between human resource management(HRM) and the overall performance of an organization. The main part of the analysis focuses on studies of articles which stress the idea that certain practices such as high-performance work systems, human resource management bundles or the high-performance paradigm have a direct, positive performance outcome if implement within an organization. The second part of the paper emphasizes of the four main perspectives of Human Resource Management, the universal perspective, the contingency perspective, the configurational perspective and the contextual perspective, by providing a framework to which extend each one of these approaches impact the performance of an organization. Furthermore, the last part consists of the conclusion, which states that there is indeed a linkage between the implementation of HRM practices and policies and organizational performance, for as they provide the company an opportunity to regard its employees as prime assets and therefore create a long-term competitive advantage out of its human capital.



Todays highly competitive business environment has led business people to question which are the major factors affecting the overall performance of a company. A good performance implies that a business organization has found a competitive advantage that truly sets them apart from their competitors, such as an innovative product or service. However, this might not always be the case, for as many companies today associate their performance in relation to their internal human resource management branch. The strategy of human resource management implies that organizations ought to shift to a resource-based perception of their company and acquire a comepetitive advantage by investing in human resources.

In recent years, several academics have focused their attention on identifying the relationship between human resource management and the performance of a company. Throughout their research, some of the major outcomes consist of greater productivity at the work place, greater involvement of the work force, high levels of motivation for employees, better performance and commitment to the organization, etc.


Literature Review

1.1 Human Resource Management and Organizational Performance

The only vital value an enterprise has is the experience, skills, innovativeness and insights of its people. Leif Edvinsso

Strategic human resource management is viewed by many as the art of finding and developing employees that best fit to the characteristics of an organization. In his research, Armstrong (2009), states that organizations can enhance their performance by creating a core competency through their human resources. He defines the human resources as the combined intelligence, skills and expertise that give the organization its distinctive charactercapable of learning, changing, innovating and providing the creative thrust which if properly motivated can ensure the long-term survival of the organization (Armstrong, 2009).

This implies that the main objective of human resource management is to develop strategies that ought to improve the productivity and involvement of employees which will result in a positive effect of the overall performance of the organization. Furthermore, an organization should perceive its employees as their main assets, and engage the practices of human resource management in acquiring and retaining a work force that best fits the specifications of the organization, and develop it further on. The traditional approach of organizations with respect to their work-force implied that employees are just a commodity, and therefore investing in them was not a requirement. In contemporary time, the concept of human resource management and its correlation to performance has let most organizations to the implementation of practices and strategies which

focus on different manners of selecting, developing, and training, motivating and rewarding the human capital. Throughout the years, research studies have been conducted in order to establish the relationship between HRM and organizational performance. First of all, research result where showing that companies who engage in a high commitment strategy, rather than a control strategy achieve both better quality and productivity. Needleless to say, the level of employees motivation had a direct response on the level of productivity, therefore on the overall performance of the company (see Appendix 1). Moreover, creating a pleasant and flexible work environment which satisfies the employees needs has also been associated with the performance of on organizations. Employees who feel a part of the company prove to be more competent, more involved and committed and have a direct cause on an organizations quality, productivity and eventually financial performance. Figure 1. provides relevant information for the correlation between HRM and organizational performance (Armstrong, 2009)

Figure 1.

Furthermore, there are several human resource management practices, known under the name of high performance work systems, which are designed in order to enhance the performance of an organization. According to Shih et.al (2005), high performance work systems can be regarded from at least two main approaches, the job infrastructure approach and the job security approach. On one hand, the job infrastructure approach implies that HR practices have to make certain arrangements at the work place so that employees are properly skilled, equipped and motivated to perform the job. Employees motivation, training programs and promotion opportunities are some of the practices used to sustain a job infrastructure that will increase an organizations performance. On the other hand, the job security approach implies that for employees to truly dedicate themselves to their tasks, companies ought to come up with means of making their employees feel safe at the work-place (Dany et al., 2008). Another dimension associated with high-performance work systems, that proved to have a correlation with an organizations performance is the high-performance paradigm which is responsible for the development of the best practices policy. Two main types of practices have been identified in relation to the high-performance paradigm: alternative work practices and high commitment employment practices. Organizations can improve performance by implementing alternative work practices such as team-work, work rotation or involvement of employees in problem-solving. Furthermore, high commitment employment practices imply training programs, premiums and bonuses or promotion opportunities (Godard, 2004). Last but not least, research has shown that particular individual practices that fall under the category of HRM bundles have a positive outcome on the performance of an organization. Such individual bundles practices emphasize on enhancing specific characteristics of the human capital to a greater extend then the individual best practices. In his articles, Subramony (2009), identifies three main categories of HRM bundles that can improve an organizations performance through its workforce. On one hand, he identifies the empowerment-enhancing bundles as those particular practices which allow employees to be part of the decision making process, problemsolving groups, job variety and possibility of providing feedback to their employers with respect to a particular task or problem.

On the other hand, the motivation- enhancing bundles are those specific practices such as performance appraisal, financial reward and recognition, promotion and even job security benefits. Moreover, the last type of HR bundles identifies by Subramony(2009), are the skillenhancing bundles. These particular type of bundles imply that the organization should provide its employees with a full description of the job and its requirements or conduct training session to improve and asses the performance of employees.

1.2 The Perspectives of Human Resource Management

In their research, Alcazar et.al (2005), identified four main perspectives of human resource management: the universalistic perspective, the contingency perspective, the configurational perspective and the contextual perspective. First of all, the universalistic approach of HRM is characterized by those particular practices that are generalizable and have proven to increase organizational performance. However, because of the lack of theoretical support of the universalistic approach which emphasizes mostly on testing, taking into account fixed variables it cannot provide a solid linkage between HRM practices and organizational performance (Pardo et. al, 2008). Furthermore, the contingency perspective acknowledges the relationship of two dependent variables, and a third independent, contingency variable. Taking into account these three factors, the contingency perspective doesnt not entirely support the idea of a relationship between human resource management and organizational performance, but it acknowledges the fact that some contingent variables of the HRM practices might impact positively the organizational performance. Moreover, the configurational perspective, HRM is regarded

combination of different factors which can be sorted under different combinations considered to

be the best patterns of managing human resources. So as for these patterns to prove successful to an organization, there has to be a consistency in the organization both internal as well as external environment (Alcazar et.al, 2005). Last but not least, the contextual perspective is considered to be the broader one, as it accounts for geographic and industry characteristics. Unlike the other perspectives, the contextual perspective recognizes the correlation between HRM practices and organizational performance, from an internal, as well as an external point of view.



After analyzing some of the main practices and policies related to human resource management, one can draw the conclusion that there is indeed a correlation between HRM and organizational performance. Most organizations nowadays seem to allocate a great deal of interest to such policies and practices, for as they regard their human capital as one of the organizations prime asset. Even though research has shown that there are certain limitations of HRM techniques, it is in the power of the organization to take advantage of such tools and apply them in the best manner that fit to the characteristics of the company. Shaping a strategy which incorporates HRM practices gives to organization the opportunity of creating a long-term competitive advantage as well as it creates a stable and enjoyable work environment for its employees. Needless to say, HRM best practices, will increase organizations productivity, for as it motivates challenges and enhances its work force to a better job performance.

Reference List:

Alcazar, F. et al. (2005) Strategic human resource management: integrating the universalistic, contingent, configurational and contextual perspectives. International Journal of Human Resource Management, 16 (5), 633-640

Armstrong, M. (2009) A Handbook of Human resource Management Practice. British Library Cataloguing, 10th edition, 3-7. Dany, F. et.al (2008) New insights into the link between HRM integration and organizational performance: The moderating role of influence distribution between HRM specialists and line managers. The International Journal of Human Resource Management, 19 (11), 2095-2100.

Godard, J. (2004) A Critical Assessment of the High-Performance Paradigm. British Journal of Industrial Relations, 42 (2), 349-375.

Godard, J. and Delaney, J. (2000) Reflections on the High Performance Paradigms implications for industrial relation as a field. Industrial and Labor Relations Review, 53 (3), 482-486.

Pardo, I. et.al (2008) The Relationship between Human Resource Strategies and Business Outcomes: A onfigurational approach. Portuguese Journal of Management Studies, 13 (2), 193-196.

Shih, H. et.al (2005) Can High Performance Work Systems Really Lead to Better Performance?. Academy of Management Best Conference Paper, 1-3.

Suramony, M. (2009) A Meta-Analytic Investigation of the Relationship between HRM bundles and the Firm Performance. Human Resource Management, 48 (5), 745-760

Appendix 1 - Outcomes of research on the link between HR and organizational performance (Armstrong, 2009).