Guest (2011) argues that we are still �searching for some answers� to the perennial question of the
linkage between HRM and business performance. Ideally, HR professionals and other organisational
leaders would be able to inform their decisions about policies and practices with sound theory developed
through research, and they would be able to assess the effectiveness of their decisions using valid
metrics. Though we may not have all of the answers, how can HR leaders move forward with what we
have? How can leaders use alternative ways of thinking about organisational performance and
effectiveness, such as �human capital management� (Armstrong, 2006) to enhance management
approaches? To prepare for this essay:
�Consider how ideas from some of your other readings this week might relate to the issues outlined in
the article.
�Formulate a critical response to Guest�s (2011) article, addressing how HR professionals might
measure the effectiveness of their own efforts and how they might test ideas about HRM practice in their
own contexts.
�What measures, metrics or tools might HR professionals use to assess the effectiveness of HRM
and/or HCM, and/or its contribution to business performance?
�What types of questions might an HR leader, or other organisational leader with HR responsibilities, be
able to answer in his or her own context about how to improve HRM/HCM effectiveness?
Introduction
The major Human Resource Management objective is literally to provide competent and skilled
employees who are well trained and experienced on the duties and responsibilities that have been
assigned to them. The policies of the HRM are to pursue the agreed goals that aim at achieving
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the high behavioral and attitudinal commitment that reflect strong identification with competitive
firm. In pursuit of excellence, the human resource requirement may be achieved by effective
tapping of consistent policies that mainly promote commitment as a consequence of promoting
employee willingness to act flexibly (Guest 1987). Successful HRM policies and practices
involve complete identification of dedicated employees with aims and values that match the
organizations core objective. The argument that employees should be considered as assets to the
company and be treated as valuable human capital instead of as variables was first forwarded by
Karen Legge (1995) and emphasized by Armstrong and Barron (2002) that the collective
abilities, skills and experience of skilled and competitive employees when combined with the
management’s ability to coordinate and deploy for the interest of the company and its optimal
performance (Grinyer, Mayes and McKiernan, 1988).
Performance management strategy in most organizations target performance improvement to
deliver on effective organization achievement, individual and team work performance. Employee
development is necessary in attainment of performance improvement in achievement of an
organization’s core competence and the satisfaction of the needs and stakeholders expectations.
Communication and employee involvement play a critical role in employee performance also.
These activities provide the measures to gauge employee performance in retrospect to HRM role
in performance management. (Guest and Hoque, 1996)
The links between HRM and performance were initially made by Fombrun (1984), Miles and
Snow (1984) and Walton (1985) These people linked business strategy in organizations to
human resource management while Walton (1985) expanded his theory to include the
organization behavior perspective that highlighted the movement from people control processes
to commitment based approaches as a management tool to motivate people to work. HRM high
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commitment principles proved successful in improving employee performance in several
organizations in Europe as documented by Peter and Waterman (1982).
Another method that was applied to measure performance of the HRM activities was the survey
based statistical analysis that studied the HRM and performance evaluation in steel mills that was
conducted by Doty (1996) in the banking sector. The other measures of performance were
carried out by Dyer and Reeves (1995) and also by Becker and Gerhart (1996) that offered
sufficient consideration for the critical conceptual issues that occurred as a result of the backlash
and reflection created during the rush for empiricism (Guest, Michie, Sheehan and Conway,
2003). The concepts of universalists, configuration and contingency were used to highlight the
relationship between the appropriate HRM practices and the application of the theories (Becker
and Gerhart, 1996)
The other method that was applied as a way of measuring the performance of the HRM polices
was based on the expectancy theory or concept (Vroom 1964). The theory was used as a basis for
determining the core elements that made up the HRM policies. Performance management
strategy in most companies target performance and skills improvement to deliver on effective
organization achievement, personal employees performance and also team work performance
play a key role in the theory (Godard 2004) Employee development and training is necessary in
attainment of performance and skill improvement in achievement of an organization’s principal
objective and the satisfaction of the stake holder’s needs and management’s expectations. (Guest,
Paauwe, and Wright, 2011)
The Balanced Scorecard has proved to be an effective tool for performance measurement. It’s
used as a strategic tool in many organizations globally. The BSC combines four kinds of
perspective that links the overall organization performance and the HRM. The HRM can gauge
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the rate of the organization’s performance by analyzing the continuous employee improvement
through empowered work force and superior project management skills (Guest, 1997).
Continuous assessment of the performance of the employee records and evaluation of their
efficiency and feedback reports on the overall effectiveness of their efforts in retrospect’s to the
HRM efforts (Gerhart, Wright, McMahan and Snell 2000)
In the airline industry, the HRM is more concerned with the customer relations as the major
component of employee performance. The number of passengers flying in a particular airline is
determined by the services offered by the receptionists and customer care team. The
effectiveness of the HRM procedures in determining the best employees to take such jobs is what
determines and rates its performance (Guest, 1987).
The other functions of the HRM in the operations department also reflect the effectiveness of the
HRM to hire efficient and productive staff. The sales and marketing department must also be
efficient in order to attract more sales (Guest and Bryson, 2009)
Improved performance on the operations of the company can be reflected in the sales of the
airline tickets and improved number of the passengers using the airlines. The reputation and the
profile of the company automatically increases with improved performance. The balanced score
card can be used to measure the performance of such organizations using the available soft
ware’s in the market (Gerhart, Wright, McMahan and Snell 2000).
The success of the balanced score card has attracted the imagination of many high profile
companies and senior managers hence most companies apply it as a mechanism of measuring the
success or failure of the managements performance. The balanced score card has been used to
track organization changes for periods that can span a decade or more. The third generation score
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card has incorporated the use of complex soft ware’s to improve its accuracy and reduce its
complex systems to simple user friendly and menu driven soft ware options (Kaplan and Norton,
1993). Companies like 2GC have developed detailed and complex strategic performance
measurement techniques that involve the design and overall implementation of the advanced
form of balanced scorecard known as the third generation BSC. The BSC soft ware can be
customized to summarize data automatically, collect and display the required data (Bible, Kerr
and Zanini 2006). Examples of such software are like the IBM Cognos Business intelligence
software that analyses and provides processed information (IBM 2013).
To conclude, the other statistical performance evaluation strategies require comparisons with the
past performances of the company early years to analyze its performance but the most important
performance rating that can be applied and easily adopted by the management of most companies
is the balanced score card (Kaplan and Norton, 1993). Successful human resource requirement
may be achieved by effective application of consistent policies that mainly promote commitment
as a consequence of promoting employee ability to act flexibly (Guest 1987).
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References
Armstrong, M and Baron, A (2002) Strategic HRM: The route to improved business
performance, Chartered Institute of Personnel and Development, London.
Delery, J. and Doty, D., 1996, ‘Modes of theorizing in strategic human resource management:
tests of universalistic, contingency and configurationally performance predictions’.
Academy of Management Journal, 39: 4, 802–835.
Dyer, L. and Reeves, T., 1995, ‘Human resource strategies and firm performance: what do we
know and where do we need to go?’ International Journal of Human Resource
Management, 6: 3, 657–667.
Fombrun, C., Tichy, N. and Devanna, M., 1984, Strategic Human Resource Management, New
York: John Wiley and Sons.
Guest, D.E., 2011, Human Resource Management and Performance: Still Searching for Some
Answers, Human Resource Management journal, Vol 21, No 1, 2011, pgs 3-13.
Gerhart, B., 2007, ‘Modeling HRM and performance linkages’, in P. Boxall, J. Purcell and P.
Wright(eds), The Oxford Handbook of Human Resource Management, Oxford: Oxford
University Press,552–580.
Gerhart, B., Wright, P., McMahan, G. and Snell, S., 2000, ‘Measurement error in research on
human resources and firm performance: how much error is there and does it influence
effect size estimates?’ Personnel Psychology, 53: 4, 803–834.
Godard, J., 2004, ‘A critical assessment of the high performance paradigm’. British Journal of
Industrial Relations, 42: 2, 439–478.
Guest, D., 1987, ‘Human resource management and industrial relations’. Journal of Management
Studies, 24: 5, 503–521.
