Strategic Human Resource
Management
Chapter 8: SHRM and
Performance
Prepared by Dr. Sarminah Samad
Learning Objectives
By the end of this session you will be able to:
• critically evaluate the claim that SHRM can impact on firm
performance;
• understand some of the theories that seek to explain why
and how HRM impacts on performance;
• explain the relevance of ‘sustainable HRM’;
• appreciate how organizations may go about measuring the
outcomes of HRM and be aware of the complexities and
difficulties involved.
What research has revealed about
performance
• Studies have suggested that SHRM can impact on
organizational performance.
• Performance outcomes have been explored at the
individual, unit, and organizational levels.
• When analyses of the impact of HRM on
performance, that performance may be
conceptualized in different ways.
SHRM and organizational performance: Some
research findings
• Increasing commitment-based HR practices leads to a
16.9% increase in sales from new products and services,
and an 18.8% growth in sales in high-tech firms (Collins &
Smith, 2006).
• There is a link between high-performance work systems
(HPWSs) and firm performance in Japanese, Tunisian, and
Jordanian companies (Takeuchi et al., 2007).
• HPWSs have a stronger effect on firm performance than
single practices, and this is particularly true in
manufacturing compared with service firms (Combs et al.,
2006).
SHRM and organizational performance: Some
research findings
• Recruitment and selection, training, and internal career
opportunities impact positively on firm financial
performance, as measured by return on assets and equity.
(Darwish et al., 2013).
• High-involvement HR practices are associated with the ratio
of market value to book value in 87 companies in Oman
(Moideenkutty et al., 2011).
Problems with evidence base
• Little consistency in measurement of HR
practices.
• Hard to determine direction of causality –
whether firms successful because they
implement HRM or successful firms more
able to implement HRM than others
• Contextual issues rarely taken into account
e.g. industry, national context, firm size.
SHRM and unit/individual performance
• Some studies have focused on performance at the
work group or unit level; this is more close to
outcome
• Recently, the main focus has been on individual
level outcomes e.g.:
• HR practices that foster a positive attitude towards the
organization also led to raised levels of discretionary
effort and motivation, reduced intent to quit, and lower
stress levels among staff
• HR management and commitment, intent to quit, and
well-being were found to be linked - and these
relationships are largely vary across different job levels.
SHRM and individual level outcomes
• Some research suggests a win-win relationship
between outcomes beneficial for the individual and
the employer – the ‘mutual gains’ approach.
• Research has found that wellbeing e.g. happiness
and relationship wellbeing are coherent with
performance
SHRM and individual level outcomes
• Some research suggests a win-win relationship
between outcomes beneficial for the individual and
the employer – the ‘mutual gains’ approach.
• Research has found that wellbeing e.g. happiness
and relationship wellbeing are coherent with
performance
Ability Motivation Opportunity theory (AMO)
• Ability–motivation–opportunity (AMO)
theory is based on the view that
implementing HRM practices and systems
that enhance employees’ ability to perform-
• (e.g. through training and development),
motivation to perform (e.g. through
employee engagement), and opportunity to
perform (e.g. through job design) will lead
to higher levels of individual performance.
Ability Motivation Opportunity theory (AMO)
• AMO Theory developed by Purcell et al.(2003).
• AMO framework to explain how the components
of an HPWSs are linked with performance,
categorizing the various elements of the HR
system as contributing to ability, motivation, or
opportunity.
• A hierarchy within AMO with motivation-
enhancing practices emerging as the most
important overall.
.
Social Exchange Theory (SET))
• Social exchange theory (SET) is based on ‘norms of
reciprocity within social relationships. Employees
are motivated within the employment relationship
to demonstrate positive attitudes
• HR practices send ‘signals’ to employees about
how committed the organization is to developing a
positive long-term relationship with them, e.g.
through HPWSs; when these exist, employees are
more likely to investing in their work.
Attribution theory
• Simply having a set of HR practices doesn’t
necessarily affect employee behaviours and
attitudes.
• Employees need to understand their
environment and will make attributions
about the HRM they experience; there is
therefore often a gap between ‘intended’
and ‘experienced’ HRM.
• It is employees’ attributions that may give
rise to performance outcomes
Attribution theory
• Two types of gap between intended and
experienced HRM:
• Implementation gap: between intended and
implemented HRM.
• Interpretation gap: between implementation
and perceptions.
• A ‘strong’ HRM system (i.e. consistent,
distinctive, consensus-based) is likely to be
a link with performance
Evaluating the evidence
• Research findings have consistently shown that,
irrespective of business strategy and context,:
• there is a strong association between the
adoption of more ‘progressive’, ‘high
performance’, or ‘high commitment’ HR
practices and organizational outcomes.
The future: Sustainable SHRM
• When SHRM originally emerged as a field of
study, a key focus was on the wider human
and social contribution of HRM.
• Then, the focus has shifted to performance.
• Now considerations of shift to HRM’s
‘green’ or ‘sustainable’
Sustainable HRM
• taking an explicit moral stance about the desired
short- and long-term outcomes of SHRM
interventions;
• refusing to adopt HRM practices that would be
damaging to employees’ well-being, such as work
intensification, zero-hours employment contracts,
or ambiguous job roles;
• focusing on fairness, participative structures, and
collaborative approaches to managing people that
enable the individual to have a say, create a
climate of trust, and build on employee strengths;
Sustainable HRM
• an emphasis on longer-term investment in sustainable
HRM interventions, such as employee development, rather
than only considering short-term performance outcomes;
• considering the environmental impact of HRM activities
and also how HRM interventions can support the
organization’s wider environmental goals;
• awareness of the increasingly connected nature of
organizations, and the need to engage in collaborative
problem-solving and learning together with partners or
others in the supply chain to develop solutions that take
into account a range of stakeholders;
• ensuring that partners, suppliers, and others in the supply
chain also adopt ethical and sustainable approaches to
HRM.
Domains of HR measurement
• Employee attitude
• Employee performance
• Employee behaviours
• Health and safety measures
• workforce profile and costs
• Return on investment in HR
• Coat and efficacy of HR activities
• Customer outcomes
The practicalities of measuring SHRM outcomes
• Service-level agreements (SLAs) are becoming an
increasingly common approach to evaluating HR’s
contribution (Marchington & Wilkinson,2012).
• SLAs comprise a series of statements about the
level of service that the HR function is expected to
provide for the organization
CIPD HR analytics
Operational data Insights driving
Basic insights:
analysis: performance:
Data collection
Basic input Key performance
for specific
measures eg indicators
human capital
absence, relating to
needs
turnover business strategy
Include
Communicate Communicating
correlations
essential data for
between the
information to difference
data
managers audiences
Levels of HR analytics
LAMP model of measurement
• Initiated by Boudreau & Ramstad (2007)
• Logic: the chosen measurement system should focus on the
factors that are logically most relevant to performance.
• Analytics: effective data analysis is important in order to
interpret the data correctly.
• Measures: should be of high quality and focus on what
matters.
• Process: measuring HR outcomes should be part of an
overarching strategic change management process, and a
key element of this is educating line managers to accept
that HR measures are an important component of the
change process
The HR Balanced Scorecard
• Initiated by Kaplan & Norton, 1998
• A methodology for linking strategic objectives with a range
of performance outcomes from 4 perspectives :
• Customers
• Organizational learning and growth
• Internal business processes
• Financial performance
• The concern was to move away from simplistic performance
evaluations based purely on financial outcomes, and instead
to consider performance from a more holistic perspective in
terms of their contribution to the aims of the organization.
Issues in HR measurement
• Seeking to quantify HR’s contribution places the
emphasis on areas that can easily be measured, but
not necessarily most important.
• Service-level agreements can lead to an
overemphasis on meeting the needs of other
departments, and downplay longer-term HR
strategic objectives.
• Relevant data may not be easy to obtain.
Issues in HR measurement
• The link between HR interventions and organizational
performance is complex and multi-layered; the collection of
HR metrics risks oversimplifying the process and creating a
misleading impression.
• Simply measuring outcomes does not lead to change or
improvement.
• The relevance of different measures varies between
industries and organizations.
• To be useful, HR measures need to focus on people outputs
rather than HR processes
