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Analyzing the links between high commitment HRM and performance is now a major
area of interest for research and policy. Originally, this stemmed from work in the USA,
but there have now been several studies in the UK, most notably by David Guest and
his colleagues. Before reviewing some of this work in more detail, it is worth reminding
readers of some of the earlier studies that claimed to establish a link between HRM and
performance. Huselid, (1995) drew his conclusions from a survey of nearly 1000 US
organizations. He divided high commitment work practices into two broad groupings:
employee skills and organizational structures, and employee motivation. The former
included items concerned with the proportion of workers taking part in attitude surveys,
the number of hours training received in the previous
year and the proportion of
workers required taking an employment test as part of the selection process. The latter
included items such as the proportion of workforce with performance appraisals linked
to compensation and the number of applicants for those posts where recruitment took
place most frequently. Output measures included labour turnover, productivity and
corporate financial performance. Huselid, (p. 667) concludes that “the magnitude of the
returns for investments in what he calls high performance work practices is substantial.
A one percent standard deviation increase in such practices is associated with a 7.05 %
decrease in labour turnover and,
on a per employee basis, 27,044 US dollars more in
sales and 18,641 US dollars and 3,814 US dollars more in market value and profit
respectively”.
The results from the survey by Patterson et al (1997) published by the Institute of
personnel and development (Now CIBD), were coated widely by the media and put
forward as evidence for the
importance of HRM as driver of, and contributor to,
improved performance. The research was based on longitudinal studies of 37 UK
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manufacturing companies that were predominantly single side and single product
operations. It has been claimed on the basis of this research- that HRM had a greater
impact on productivity and profit than a range of other factors including strategy, R&D
and quality. For example, it was argued that 17 % of the
variation in the company
profitability could be explained by HRM practices and job design, as opposed to just 8
percent from research and development, 2 percent from strategy and 1 percent from
both quality and technology. Similar results were indicated for productivity. Below we
examine in more details four of the studies undertaken in the UK by Guest et al (2000a,
2000b), West et al (2002), Guest et al (2003) and Purcell (2003) and withdraw on some
in-depth reviews of the HRM- performance link. Some of the best known studies are
outlined in the table 1. On the basis of the study some forceful claims have been made
about the impact of HCM sometimes referred to as high commitment HR and
performance. Two CIPD reports (2001a, 2001b) argue that the economic and business
case for good management has now been proven. The CIPD report (2001a, p4)
notes
that ‘more than 30 studies carried out in the UK and the US since the early 1990s leave
no room to doubt that there is correlation between people management and business
performance, that the relationship is positive, and that it is emulative’.
Since it is argued, senior personnel practitioners now agree that the case for HCM
impacting on operational
performance is not in dispute, the key question is how to make
it happen. From US perspective, Pfeffer (1998, p306) agrees that best practice HRM
has the potential to have a positive impact on all organizations,
irrespective of sector,
size or country. Organizations only need leaders possessing both insight and courage to
generate the large economic returns that are available from high commitment HRM.
Many of the studies have been focused on manufacturing but Batt and Doellgast (2003,
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p306) also suggest that a growing number of studies show collaborative forms of work
organizations that predict better performance in the service sector’.
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