The Romance of HRM and Business Performance, and
the Case for Big Science
Toby D. Wall and Stephen, J. Wood
Institute of Work Psychology
University of Sheffield, UK
The Romance of HRM and Business Performance: The Case for Big Science
It is often assumed that research over the last decade has established an effect of human resource management (HRM) practices on organizational performance. Our critical assessment of existing studies finds that, while collectively they have opened up a promising line of inquiry, their methodological limitations make such a conclusion premature. We argue that future progress depends on using stronger research methods and design, that in turn will require large-scale long-term research at a level of magnitude that probably can only be achieved through partnerships between research, practitioner and government communities. We conclude that progress so far justifies investment in such big science.
Key words: Human resource management (HRM), high performance work systems, high performance work organization, company performance, organizational performance. Picture the scene. A leading scholar, specializing in human resource management, is called to court as an expert witness by an international company that has brought a case against a firm of consultants. The company has paid several hundred thousand pounds in consultancy fees, and invested many times that amount in its personnel function, to introduce the ‘performance-enhancing’ human resource management (HRM) practices recommended by the consultants. Three years on there is no evident return on their investment. The company is suing the consultants on the grounds that they created misleading expectations of the effect of HRM practices on performance. The expert witness is asked to prepare a report addressing two questions: (a) whether it was reasonable of the consultants to assume an effect of HRM practices on performance on the basis of both researchers’ accounts of their own findings and how practitioners have been encouraged to view them; and (b) the extent to which the evidence in fact can be interpreted as establishing such a causal link. In this paper we present the report that we would have submitted were we the expert witness. Having adopted this format, we will conclude by considering the implications of our assessment for future research. First, however, we introduce the core concepts.
Human resource management (HRM) is a term used to represent that part of an organization’s activities concerned with the recruitment, development and management of its employees (Wood & Wall, 2002). Within that domain, current interest is focused on HRM systems emphasizing all or most of the following practices: sophisticated selection methods, appraisal, training, teamwork, communications, empowerment, performance-related pay and employment security. Collectively these are deemed to contribute to the skill and knowledge base within the organization, and to employees’ willingness to deploy their learning to the benefit of the organization. For this reason authors have used labels such as “human capital-enhancing” (Youndt, Snell, Dean & Lepak, 1996), “high commitment” (Wood & de Menezes, 1998), or “high involvement” (Guthrie, 2001; Vandenberg, Richardson & Eastman, 1999) to characterize the approach. They often contrast this with traditional, Tayloristic or control approaches to management, which emphasize low skill, limited employee discretion and a tight division of labour (e.g., Arthur, 1994; Lawler, 1986; Walton, 1985).
The rationale for focusing on such high commitment approaches to HRM lies in the assumption that the practices will enhance organizational performance. Related to this is the view that the practices will be a source of unique and sustainable advantage because, unlike other initiatives such as the introduction of new technology, they result in skills and...
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