Effect of Hrm Practices on Productivity

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Summary: -
The following is the brief summary of the main findings from the Bloom & Van Reeenen’s consideration for impact of HRM on productivity:- •Increase productivity from incentives both individual & group bonuses. •Increase in productivity because workers are generally attracted to the organizations which offer high incentives. •More efficient when introduced with other complementary features within HRM practices such as team work , group bonuses and firm characteristics such as ICT, decentralization etc. •Distortions due to perverse incentives.

Incentives pay system has stronger effects on more able workers and hence is more likely to be associated with high dispersion of productivity. Also, the effects are stronger then selection effect. Purpose of the article: -

The authors try to find a relationship between productivity and HR practices. They also try to examine role of HR management in productivity; how firms sustain with even inferior HR management practices which includes individual and group incentives pay, appraisals, hiring, decentralization etc.; how this pattern varies across US & European countries.

Theoretical back ground: -
Many studies reveal that there is a positive correlation between productivity with fair HRM the investments in these practices do not overcome the profits. The design approach for HR management assumes all companies always try to improve their HR practices& generalization.However, variations may occur between firms but it doesn’t harm the overall productivity and each firm is still sustaining. It states forcing any firm adopt incentives pay schemes may harm the performance (Lazear, 2000). It also includes application econometrics in HR practices. Another response to this question is firms try to maximize profits not productivity. The elimination of piece rates pay system gradually reduced productivity but profits significantly increased due to increase in quality in the dearth of piece rate. And...
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