Theories Of Hrm Performance Linkages

There are two different approaches in literature on the HRM performance linkages - one of conviction and one of denial. The theory of conviction looks to deal with the link between the human resource management (HRM) practices and firm performance.The contents of the black box are presently unknown with a wide variety of theories on what is actually inside it. The denial theory doubts the presence of the linkage. However, over the last 15 years, research has shown that there is at least some relation between HR practices and firm performance. Categorization of Outcomes

The gap between HR practices and performance can be analyzed better by classifying the outcomes of the practices.

Proximal Outcomes: These denote the outcomes which occur

Examples are market value, firm reputation, etc.

This type of classification is called Dyer and Reeves’ categorization of outcomes.

Therefore, the effect of HR practices on different aspects of a firm’s performance actually depends on the distance between that particular outcome and the practice. Black Box

The gap between HR practices and firm performance is represented as a black box. The contents of the black box, i.e., the processes and mechanisms which manifest themselves during the HRM-performance linkages, are currently unknown. There are a lot of theories on how to open the black box and about what is inside it.

Performance Linkage Models

Guest Model:

This model focuses on HR practices which look to motivate the employees and impart knowledge and skills to them. These practices affect behavioral outcomes such as cooperation, organization citizenship, etc , which affect organizational outcomes such as productivity, innovation, etc, which in turn affect financial outcomes such as profitability.

Becker et.al. Model

This model believes that HRM practices should follow from the business strategy of the firm. This way, they could provide employees motivation to align their activities to the strategy, increase discretionary behaviour and ultimately improve operating performance, profits and firm

The following characteristics of HRM can fortify distinctiveness.

Visibility: This measures the transparency of the HR practice. Greater visibility means greater information sharing about the practices which leads to greater awareness. When the system involves a wide range of HR practices such as selection, training and development, performance appraisal, etc

Understandability: The practice and the reason for conducting such a practice should be understood by all the stakeholders. Any ambiguity in the system may lead to employees filling the resultant gaps with their perceived practices.

Legitimacy of Authority: The fact that the approval for the HR practice came from a legitimate authority lends credibility to it and also reassures employees that the top management is fully behind the proposed practice.

Relevance: The adopted HR system must be in line with the organization’s business strategy. The practices of the HR system should cultivate traits in the employees which will better the firm’s performance in the areas it wants to