Human Resource Management and Organizational Performance


The study of HRM has come a long way in a relatively short period of existence. In a society that has become increasingly dependent on knowledge and skills it is clear that the companies training perform an important role in overall organization performance. This training comes from Human Resource Management practices. HRM practices are defined as the activities intend to enhance the performance of organizations and employees ability to achieve the goals of organization. HRM practices raise the outcomes of HRM to influence the organization performance

This study focus on the relationship between HRM practices variables and organizational performance, impact of HRM practices on organizational performance and productivity. The performance of an organization depends on many factors and employees contribution. Impact of combined performance of employees on organization performance is greater than individuals. Explanation, importance of relationship and the impact of the HRM practices on the performance of organization. Different approaches of HRM practices and business strategy. It reflects the approach and different factors of the HRM practices. Effect of the individual and shared climate levels of organization

Different Studies have emphasized the contribution of Human Resource Management practices to the organizational performance. These studies focused on HRM practices. There is shared idea that HR practices are only effective when bundles are considered including incentive system, training, flexible job assignment, high selectivity and performance management. These practices contribute to increase employee and organization performance by increasing the level of productivity and financial performance. HRM practices have an effect of motivating employees to adopt the required behaviours, it links to the organizational climate, service environment and customer satisfaction. Outcome of investment on employees training each year, this finding is generally shown to be stronger when an organization provides employees with opportunities for the involvement in decision making and organises work in ways that allows employees a higher level of discretionary efforts in the way work is done

HRM practices and Organizational performance

According to studies of Boselie, Paauwe and Jansen (2000), that relationship between relevant dependant and independent variable will vary according to such influences as technology, unionization, industry, company ownership and location, capital intensity, company age and size. Contingency arguments imply potentially complex interactions between HRM variable, between performance and contingency factors, between HRM variables and performance indicators and contingency factors. Commitment HR practices are based on the idea that the closer an organization’s HR practices resembled the correct prototypical system, the greater the performance gain

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Nicolai and Dana (2009), focus on the impact of individual and bundles of HRM practices. The focus of the empirical research has been divergent and it is clear that reward and training have attracted disproportionate. These are important HRM practices, but it is hard to argue on a priori grounds that positive impact of, for example job design variables. They found that practices such as the use of selective hiring, the extent of training and active participation of the employee in decision making were conducive to organization learning, while group performance-based compensation was not found to be significant for organization learning

A number of HRM researchers have argued that synergies are likely to exist among individual HRM practices. These studies indicate that when HRM practices are applied as coherent systems, they have greater effects on organization productivity than the sum of the individual effects from each practice alone

Cristina (2007), explain the relationship and impact of HRM practices in organizational performance. People management should be matter of discussion and investment on the part of companies. As for as the theoretical approaches are concerned, the conceptualization of the relationship among HRM practices and business strategy has given birth to three main approaches, named universalistic, contingent and configurational. Under the common relationship among HR Practices and organization performance or outcome, these models hypothesize different set s of variable and relations among them eventually influence corporate results

In the view of Peter and Donna (2008), firstly approach which reflects the early work examining the impact of HRM practices implicitly assumed a universalistic, rational model of work organization yielded significant performance dividend. This has been closely associated with a best practice model of HRM. Secondly HR practices are required to have consistency with other organizational factors to be effective. These factors include the nature of market and legislative change. Climate of organization both as individual level attribute and as a set of shared beliefs and values – have effect of motivating employee to adopt desired attitudes and behaviour that in the collection, help to achieve organization’s goals. HRM system can be read as communication between employer to employee. The effectiveness of HRM system as communication to employee will depend on those features that define HRM system strength. These features are distinctiveness, consistency and consensus. Rita and Miguel (2004), research has shown that HRM practices contribute to organizational performance. Early studies emphasized the impact of several separate HRM practices, such as compensation, performance management system and training. Later studies reported the positive impact of HRM practices on organizational performance as well as the virtuous impact of HR sophistication, measured by investment in HR planning, in hiring and in employee development on productivity, particularly in capital intensive organization. These latter studies have a common idea that bundle of HR practices improve employee and organization performance. Overall set of HRM practices developed the employee’s skills, ability and motivation. High performance work system contribute to improve employee and organization performance by increasing the level of productivity

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Organization’s Demand and outcome for HRM practices

According to Bo Hansson (2002), in estimating the impact of training on the probability of the organization being a top performer in the industry, controlling for the past profitability is an effort to measure the net contribution of training to the profit op the organization. Percentage of wage bills spent on training is significantly and positively associated with the profitability in an organization. The proportion of employee being trained is positive but not significant. Most significant factor to indicate current performance is the past performance

The measure of internal promotion is significantly and positively associated with profitability only in the presence of how much is invested in training and not in the estimates of how many employees are trained every year. Focusing on internal promotion seems to be a good strategy for organization profitability as this strategy reduces the training. Because measure of internal promotion is significantly in the presence of how much is invested in training

Bruce and Benjamin (2009), explain the individual organization’s decision regarding the extent of the investment in HRM practices. Following the mainline of HRM practices they assume the organization short-run objective is maximum financial return, which is simply treating as maximum profit. This assumption limits to private sector for profit organizations. The HRM practices are treat as an input factor in production. That is the organization’s output is assumed produced with labour, capital and HRM practices. HRM is utilized therefore, because of its boost productivity. HRM helps to produced more output and profit

Strength of HRM Practices and Turnover

Rita and Miguel (2004), presents the links between HRM feature and outcome at organizational level, such as financial performance and productivity. HRM system or practices creates the conditions to achieve organizational goals by influences employee attribution. Individual practices intended to achieve objectives, such as promoting innovation, process deals with how the HRM practices is designed and administrated to send signals to employees that allow them to create a shared meaning about the desired response and collective sense of what is expected. According to one study (B Hansson, 2002), turnover is significantly and negatively associated with being a top performing organization. A large amount spent on employee every year. It is crucial for an organization to retain their employee in that turnover reduces the returns to training. This reasoning is in accord with the rational that mobility lowers an organization’s training investment in that reduces the return on these training investments. However, an explanation for the finding that mobility is not determining the provision of training is that the economic benefits to the organization from training their employees outweigh the cost of lost human capital investment that are caused by personal turnover. Important determination of training is personal turnover as it affects the ability of organization to benefit from training

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Aims and Objectives

Following are the aims and objectives of this study

  1. To show the Impact of HRM practices on the performance of organization
  1. Effect of HRM practices on employee’s performance, ability and behaviour.
  1. Contribution of HRM practices in organization performance. what package of HRM practices affect performance. The Relationship between HRM and Organizational Performance. Organization Performance and HRM practices


We can conclude that there are possibilities for including the institutional setting in theoretical framework in order to have a full coverage of the relationship between HRM practices and performance. On a number of HRM practices the individual organization cannot differentiate itself from competitors. The best practices are already enforced for majority of organization due to role. Highlight the impact of the individuals and bundles of HRM practices on the productivity and performance on organization

The purpose of study is to explore relationship between HRM polices human capital and organization performance at business and individual level by considering different variables. From the concept of the strength of the HRM system, we can suggest that workplace climate provide a high credible mechanism in creating the basis on which practices are institutionalised into the inimitable asset for the organization. Workplace climate appears to act as a significant mediator between HRM system and performance

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