In the current global arena, there has been a notable acceptance of the soft model of human resource management as business organisations embrace the commitment of motivating and leading employees to attain strategic goals. Human resource management has been perceived as a driver of competitive advantage when aligned with organizational objectives…
Business organizations has been apt in declaring their commitment in treating employees as valued assets and a source of competitive advantage yet empirically "organisational reality appears 'hard' with an emphasis on the quantitative, calculative, and strategic aspects of managing a head count" (Gill 1999).
Empirical evidences on the effectiveness of human resource management as a source of competitive advantage have been widely documented. During 1995, the study of Huselid conducted in almost 1000 US players in various industries concluded that "the magnitude of the returns for investments in high performance work is substantial." Furthermore, "a one percent standard deviation increase in such practices is associated with 7.05% decrease in labour turnover, and on a per employee basis US$27, 044 more in sales, and US$18,641 and US$3,814 more in market value and profits, respectively" (Huselid 1995). This study has been one of the earliest and most extensive works linking HRM to actual business performance. The findings has been strongly supportive on the view that HRM provides companies with competitive edge because HR practices increased employees' trust, job satisfaction, and commitment while eliminating work intensification and reducing stress.
In the United Kingdom, wide array of case studies have also been documented which strongly links HRM to organisational performance. In 1997, Patterson et al released the results of their survey utilizing 67 manufacturing industries. This has been published by the Institute of Personnel Development which is currently known as CIPD and highly quoted for its enlightening insights. The study has put forward the "importance of HRM as a driver of, and contributor to, improved performance" (Patterson et al 1997). It is also interesting to note that this study asserts that "HRM had a greater impact on productivity and profits than of other factors including strategy, research and development, and quality" (Patterson et al 19997). Going further, Patterson et al, uncovers that while 8% in variations from profitability is explained by R&D, 17% is explained by HRM practices. This is highly significant compared to the 2% and 1% garnered by the strategy and quality, respectively.
The study of Guest et al in 2000 also stresses the importance of human resource management practices in organisational performance. This research links specific human resource practices like job security, recruitment and selection, and training and development with performance outcomes including financial performance, quality, and productivity. It has been uncovered that 70% of the chief executives interviewed for the study asserts that their business strategy relied a lot on people as a source of competitive advantage (Guest et al 2000). On the other hand, less than half of them "felt that 'people issues' are more important than financial and marketing issues" (Guest et al 2000).
This particular research opens an important field for further queries. Even though it concluded that HRM is positively correlated with performance, it has also been observed that only a small proportion of the companies considered do practice more than ...
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