The Impact of Hrm Polices on Turnover and Productivity

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© Academy of Management Journal 1995, Vol. 38, No. 3, 635–872.

THE IMPACT OF HUMAN RESOURCE MANAGEMENT PRACTICES ON TURNOVER, PRODUCTIVITY, AND CORPORATE FINANCIAL PERFORMANCE MARK A. HUSELID Rutgers University
This study comprehensively evaluated the links between systems of High Performance Work Practices and firm performance. Results based on a national sample of nearly one thousand firms indicate that these practices have an economically and statistically significant impact on both intermediate employee outcomes (turnover and productivity) and short- and long-term measures of corporate financial performance. Support for predictions that the impact of High Performance Work Practices on firm performance is in part contingent on their interrelationships and links with competitive strategy was limited.

The impact of human resource management (HRM) policies and practices on firm performance is an important topic in the fields of human resource management, industrial relations, and industrial and organizational psychology (Boudreau, 1991; Jones & Wright, 1992; Kleiner, 1990). An increasing body of work contains the argument that the use of High Performance Work Practices, including comprehensive employee recruitment and selection procedures, incentive compensation and performance management systems, and extensive employee involvement and training, can improve the knowledge, skills, and abilities of a firm’s current and potential employees, increase their motivation, reduce shirking, and enhance retention of quality employees while encouraging nonperformers to leave the firm (Jones & Wright, 1992; U.S. Department of Labor, 1993). I am very grateful to Brian Becker for his many helpful comments on this article and for his direction and guidance on the dissertation on which it is based. I would also like to thank James Begin, Peter Cappelli, James Chelius, John Delaney, Steve Director, Jeffrey Keefe, Morris Kleiner, Douglas Kruse, Casey Ichniowski, David Levine, George Milkovich, Barbara Rau, Frank Schmidt, Randall Schuler, Anne Tsui, David Ulrich, seminar participants at Cornell University and the University of Kansas, and this journal’s anonymous referees for their comments on earlier versions. Any and all remaining errors are mine. This study was partially funded by grants from the Human Resource Planning Society, the Society for Human Resource Management Foundation, the Mark Diamond Research Fund, and the SUNY-Buffalo School of Management. The interpretations, conclusions, and recommendations, however, are mine and do not necessarily represent the positions of these institutions. 635

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Arguments made in related research are that a firm’s current and potential human resources are important considerations in the development and execution of its strategic business plan. This literature, although largely conceptual, concludes that human resource management practices can help to create a source of sustained competitive advantage, especially when they are aligned with a firm’s competitive strategy (Begin, 1991; Butler, Ferris, & Napier, 1991; Cappelli& Singh, 1992; Jackson& Schuler, 1995; Porter, 1985; Schuler, 1992; Wright & McMahan, 1992). In both this largely theoretical literature and the emerging conventional wisdom among human resource professionals there is a growing consensus that organizational human resource policies can, if properly configured, provide a direct and economically significant contribution to firm performance. The presumption is that more effective systems of HRM practices, which simultaneously exploit the potential for complementarities or synergies among such practices and help to implement a firm’s competitive strategy, are sources of sustained competitive advantage. Unfortunately, very little empirical evidence supports such a belief. What empirical work does exist has largely focused on individual HRM practices to the exclusion of overall HRM...
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