Introduction statement
Does human resources management add value? In the past, human resources professionals could only theoretically express employees’ commitment, turnover, and morale as products of human resources efforts (Ramlall, 2003). Moreover, the function of human resources was never taken as being a value added partner, but as an administered function and regularly as an expense-generator (Philips 2003). Nevertheless, a complete paradigm shift has been experienced to the field of human resources. Firms started to recognize that their people are a source of competitive advantage (Pfeffer, 1994). As a result of the criticism that HR does not add value and to measure the impact of HR practices on people and organizations; the past years have experienced significant academic research that attempted to reveal the impact of HR practices and firm performance.
According to Dyer and Reeves (1995), in previous research the measures of performance can yield several outcomes, and can be grouped in the following categories: (1) outcomes that can directly be related to human resources such as absenteeism, turnover, and individual or group performance, (2) outcomes that can be linked to organizations such as productivity and quality of services, (3) financial outcomes, and (4) stock market performance.
The researcher of this paper examined the impact of HR on the organizational level. In particular, the researcher focused on the impact of HR on firms’ productivity and financial outcome by examining the major HR practices, the strategic role of HR practices, and then explaining the reasons behind measuring HR’s efforts and how it can be done.
Most of the studies on the HR performance outcomes were between 1995-2006; more recent research was not available. Also, due to the time frame of this research, the researcher depended on prior studies survey analysis. The survey conducted in this study was a reflection of professional perspectives on HR and its impact on performance.
Purpose of the study
The purpose of the research study was to explore and evaluate previous research on the relationship between human resources practices and organizational performance. The underlined assumption was that Human resource practices and organizational outcomes are closely interlinked. It is the belief of the researcher that Human resources is one of the most vital assets of any organization, therefore the researcher's attempt was to prove or disprove that HR can add value.
Research problem
According to Ulrich (1997), “HR practices seem to matter; logic says it is so; survey findings confirm it” (as cited in Armstrong, 2006, p. 20). But despite the belief that HR mattered or had value to an organizations as a whole, limited evidence pointed to this belief. Studies that have been carried out in the recent past indicate that most companies undertake little or no appraisal of the efforts of their human resources department. As pointed by Liu, Combs, Ketchen, & Ireland (2007), a lot of studies have been carried out that show a connection between HR and organizations’ performance, but executives still wonder if funds allocated to Human resources are worthy and can lead to be a good investment. By reviewing the major research in this field, the researcher's intention in this paper was to highlight the connection between HR practices and firms performance. With this data, HR professionals and organizations would be able to better understand or prove the impact of HR on their organization and determine if HR is a worthy investment.
Research question(s)
Is there a correlation between HR practices and firms’ productivity and financial performance?
Is there an impact for strategic human resources management on firms’ performance?
Can HR effectiveness be measured? How and why?
Methodology description
In order to answer the research questions listed above, the researcher focused on a survey composed of questionnaires that were sent to HR professionals in different sectors and regions. The researcher also reviewed existing literature surveys to help find answers to the above questions. The result of the existing literature surveys hadhelped the researcher understand the effects of HR on firms’ performance. Moreover, the survey sent to HR professionals helped the researcher capture their professional perspectives on whether they believe that HR has value, and has an effect on the organizations in which they worked. The answers provided insight on the perspectives of other HR professional about the importance of the HR practices, which ultimately can help the researcher or other HR professionals in their career.
Summary
This research paper focused on the HR practices and its impact on firms’ productivity and profitability. The researcher's intent was to show the link between Human resources and companies’ performance. Generally, the researchers strongly believed that human resources department is one of the most vital assets of any organization. This study was to prove or disprove that there is a positive link between the two.
Conclusion statement
The purpose of the previous section was to analyze the recent studies pertaining to the effects of human resources management on firms’ performance. The literature review helped the researcher to answer the research questions in regard to the relation between HR and performance outcome in addition to HR measurements. The literature review was divided into three major themes. The first theme highlighted some of the HR practices studied in relation to performance. The second section highlighted the positive role of strategic HR practices and firms' performance. The overall results of the three themes showed a significant link between the major HR practices and firms’ performance. The third theme explained the reason behind measuring HR and how HR effectiveness can be measured. Moreover, the third section showed that HR can prove itself as a value added by putting certain metrics and measurements in place.
