Academic journal article IBAR

Human Resource Management Practices, Business Strategies, and Firm Performance: A Test of Strategy Implementation Theory

Academic journal article IBAR

Human Resource Management Practices, Business Strategies, and Firm Performance: A Test of Strategy Implementation Theory

Article excerpt

HUMAN RESOURCE MANAGEMENT PRACTICES, BUSINESS STRATEGIES, AND FIRM PERFORMANCE: A TEST OF STRATEGY IMPLEMENTATION THEORY1 Abstract

A moderated regression analysis was used to relate sixteen top management team HRM practices to firm performance under Differentiation and Cost Leadership strategies. This was done for 115 strategic business units of US Fortune 500 companies to test strategy implementation theory. Both universal and contingency relationships were found with the former appearing to be more pervasive.

There is a new "proactive" approach, which bestows upon HRM the strategic importance heretofore reserved for financial and technological resource decisions, which is sufficiently different from the more traditional approach to HRM to merit a new name: Strategic Human Resource Management (SHRM). This suggestion is consistent with the strategy implementation model developed by Galbraith and Nathanson (1978) that proposed in order for strategy to improve firm performance, it must be matched with appropriate processes and systems- including HRM. Proponents of SHRM argue that HRM does (or should) play an important role in helping a company achieve its strategic goals by contributing to strategy implementation and, sometimes, strategy formulation (Devanna et al,1984; Cook and Ferris,1986; Schuler and Jackson, 1987). Since strategic success is typically measured in financial terms, the effectiveness of HRM within this "strategic framework" is evaluated not in terms of worker satisfaction, employee relations, equity or other micro factors traditionally emphasized in personnel practice and research, but in terms of how HRM activities contribute to the company's "bottom line" (Milkovich et al, 1983; Misa and Stein, 1983; Frohman, 1984). Accordingly, managers are being encouraged by academics and consultants to unleash HRM as a powerful management tool to help bolster organizational performance.

Despite the enthusiasm about HRM's potential contribution to organizational performance expressed in the academic and popular press, and the centrality of the HRM performance linkage in emerging models of SHRM, there is little clear empirical evidence of a positive relationship between HRM practices and organizational performance or effectiveness (Schlesinger, 1983), and even less research examining the mechanics of this linkage. There is also no research we could find on the relationship of various executive human resource practices to SBU strategy and performance, in spite of the increasing recognition given to the importance of the top management team (TMT) in organizational effectiveness (Hambrick, 1984). Certainly we would expect that the skills and behaviours of the TMT is especially important to the successful implementation of a firm's strategy and to firm performance.

To help redress this deficiency, this broad, exploratory study examines the relationship between important elements of organizations' HRM systems (specifically, the selection, compensation, performance appraisal and training of the TMT), SBU strategy and SBU performance. In a departure from earlier studies focusing exclusively on just one type of HRM-performance relationship (e.g., contingency relationships), this study takes a comprehensive view that considers both simple and complex forms of interaction. Thus, our analysis provides a basis not only for discrimination among 16 different TMT HRM practices according to their apparent effect on SBU performance, but for evaluating the relative dominance of alternative theoretical models of HRMperformance linkages. These different models of the HRM-performance linkage include the (1) "strictly universalistic" relationship where a HRM practice has a general positive or negative relationship with performance, (2) the "strictly contingent" relationship where a practice relates to performance only in a specific strategy setting, (3) a simultaneous universalistic/contingency relationship where the HRM/performance relationship, while exhibited among firms generally, is stronger in a specific strategy setting, and (4) an "irrelevant" or absent relationship where HRM practice has no apparent impact on performance. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.