Module code and name

Impact of HR Management on
Organizational Performance
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8th November, 2015

Table of Contents
Introduction:....................................................................................................................................3
Human Resource Management Practices and Organizational Performance:..................................3
Recruitment and Selection:..........................................................................................................4
Training and Development:..........................................................................................................4
Compensation:.............................................................................................................................4
Performance Appraisal Systems:.................................................................................................4
Conclusions:....................................................................................................................................5
References:......................................................................................................................................6

Introduction:
Increasingly organizations are recognizing that human resource is a source of competitive
advantage for their business. Careful attention is required towards the practices which are
influencing this business asset. This evolution in the mind-set of top level management has
encouraged the academic research in the field of human resource management (HRM) practices.
The research has focused on the relationship between the HRMs practices and organizational
performance (Park and Kim, 2014).
Human resource management has gain importance as a tool for gaining competitive advantage in
this global business environment. Similar to other resources in the business like natural
resources, technology and economies of scales, the human resource is also adding value to the
organization. For utilizing the best capabilities of human resource the organization should
develop formal policies and procedures which emphasize on enhancing employee performance.
Such policies and procedure are recognized as human resource management practices that focus
on enhancing employees capabilities, knowledge and skills etc. Therefore the major emphasis of
this article is to study the role of human resource management practices towards organizational
performance.

Human Resource Management Practices and Organizational Performance:

Different research studies have been conducted on the human resource management and
organizational performance to show the relationship between the two variables. Huselid (1995)
discussed that there is a significant relationship between human resource management practices
and organizational productivity. This productivity is in terms of both physical output and
financial performance. Similarly Hoque (1999) explained that human resource management

practices are strongly correlated to perceived job satisfaction of an employee, his quality of work
and also to the financial performance of the business unit. Khatri (2000) explained the similar
relationship between the HRM practices and organizational success in terms of profit and
productivity.
The literature of human resource management is divided into two strands. One strand evaluates
the influence of complementary human resource management practices on organizational
performance. The other strand analyzes the effect of individual human resource management
practice on organizational outcome (Gerhard and Becker, 1996). The following part will discuss
some of the theories depicting what is the impact of each human resource management practice
on organizational performance.
Recruitment and Selection: This practice of human resource management incorporates the
process of selecting and hiring the right candidate for the right job. This process has a significant
influence on the abilities and value of new employee hired in the organization. When the selected
employee is not compatible to the organizational standards this may affect the organizational
performance (Huselid, 1995).
Training and Development: Tsai (2006) depicted in his research work that the organizational
work quality can be enhanced by emphasizing the activities related to employee development
and also by providing training opportunities to the employees.
Compensation: For motivating the top level managers who are contributing to organizational
growth and success they should be compensated effectively. The employees should be awarded
competitive incentives for motivation.
Performance Appraisal Systems: The important HRM practice for enhancing employee and
organizational performance is performance feedback by supervisors. It is an effective mechanism

for a supervisor to communicate with his subordinate. When the information about employee
performance is communicated it influences the organizational effectiveness.

Conclusions:
From the above discussion it can be concluded that human resource management is considered as
a significant variable in determining the organizational performance. Therefore the organizations
should emphasize on HRM practices to gain competitive advantage in globalized business world.

References:
Hueselid, Mark. 1995. The impact of human resource management practices on turnover,
productivity, and corporate financial performance. Academy of Management Journal 38: 635672.
Gerhart, Barry. And Bekcer, Brian. 1996. The Impact of Human Resource Management on
Organizational Performance: Progress and Prospects. The Academy of Management Journal 39
(4): 779 801.
Hoque, Kim. 1999. Human Resource Management in the Hotel Industry: Strategy, Innovation
and Performance. London: Routledge.
Khatri, Naresh. 2000. Managing human resource for competitive advantage: A study of
companies in Singapore. International Journal of Human Resource Management 11(2): 336365.
Tsai, Chung Ji. 2006. High performance work systems and organization performance: An
empirical study of Taiwans semiconductor design firms. International Journal of Human
Resource Management 17(9): 1512-1530.
Park, Ji Sung and Kim, Seong Su. 2014. The Moderating Roles of Knowledge-Transferring HR
Practices in the Aging Workforce-Organizational Performance Relationship - From the
Knowledge Management Perspective. Journal of Human Resource Management Research
21(3):173-196.