2013.09.30.

Major Topics for Today

HRM and Organisational
Performance
CHRM / Lecture
Week 2

Linking HRM and Organisational

Performance personal experiences

Two Forms of HR Advantage

Human Capital Advantage (Best practices,

Best fit)

Organisational Process Advantage

(Understanding the black box)

SHRM Theory

An organisations human
resource
assets
are
potentially the sole source of
sustainable advantage.

Resource-Based Theory of the

FIRM

Competitive advantage depends on an

organisation having superior, valuable,
rare, non-substitutable resources at its
disposal and that such resources are
not easily imitated by others.

Huselid (1995) A Survey of

968 US Firms
Do good HR practices deliver
organisational results?

High
Performance
Work Systems
(HPSW)

employee turnover

Sales

Profits

2013.09.30.

Sheffield Effectiveness
Program

A Growing Evidence of the

Strategic Nature of HRM
The Best Workplace Survey

Based on 100 SMEs:

In terms of influence
on the bottom line
People management is more important
than an emphasis on :
quality, technology, competitive strategy
or RD

Does good HR deliver

organisational results?

80% of the top ten companies CEO stated that the knowledge,
qualifications and commitment of employees is the major source of
competitive advantage

Good company atmosphere

High quality management practices
Promotional opportunities
Just pay sytem
Accepting organisation culture change
Communicating vision

How HR can help drive

organisational performance
- CIPD conference 2013

YES

http://www.youtube.com/watch?v=4Oj
3Kntp3is

Two Forms of HR Advantage

1. Human Capital
Advantage (HCA)
Best Practice
Best Fit

2. Organisational Process
Advantage (OPA)

2013.09.30.

1. Human Capital
Advantage (HCA)

Do universally good HR
practices exist?
Best practice or Best fit?

Best Practice
Best Fit

The Best practice

Approach

The importance of integrated HR

systems

There exist certain HR practices that are

universally effective in helping organisations to
gain competitive advantage and to increase
company performance.
For example:

Improving employees competencies

Increasing commitment
Job enrichment
Benefits tailored to individual needs

The High Performance Work

System Approach
Debate: there are HR bundles that do lead to higher
organisational performance.

Not individual HR practices lead to

positive results
BUT
HR bundles

Careful selection
Skills and career development
Linking performance and pay appropriately
High commitment practices

The Best fit Approach

Acknowledges the link between HR practices and

competitive advantage, but denies the existence
of universally good solutions for all organisations
Contingency approach: a practice that works
well in one company might not lead to the same
positive results in another one.
Influencing factors:

If combined consistently, will yield to better financial

results

Company size
Dominant business strategy
Local labour market
Life-cycle of the organisation

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2. Organisational Process
Advantage

How do good HR practices

deliver organisational results?

Quantitative surveys on HRM

and company performance.

The Black Box

have focused on assessing the link

between practices and performance ,
but neglected the mechanisms linking
them

HR
practices

Organisational
performance

How does it work?

The Black Box

How does it work?

Importance of informal processes

The role of the individual line managers as
agent
Employee attitudes
Differences between espoused and
enacted policies
The values and culture of the organisation

The importance of agency of the

HR strategy

Problems of implementation and

interpretation
Having a particular HR policy will not
necessarily lead to a desired outcome.

2013.09.30.

Organisational Process
Advantage

How HR policies are translated into

operation
These processes are often tacit and
intangible

Conclusions
Sources of HR Advantage:

Best Practices + Best Processes

Series of practices and processes that
together contribute to the competitive
advantage of the company