THE NEED TO MEET THE NEED - On the HRM-Performance Linkage

Abstract

Problematization Reacting to a demand for greater accountability in organizations across all functional areas of business, HR has been facing fundamental reorganization over the past decades, resulting in significant changes of HR’s profile and its position within the organization, and calling for new approaches and practices. HR today is commonly viewed as an organizational resource, which can, and should contribute to the company’s competitive advantage and enhance its value creation. Both academics and executives started to assume the need for a better fit between organizational strategy and HR practices. In large part, this assumed need of fitting HR to business strategy gave rise to a new field of scientific research. However, although SHRM research reasonably stresses the alignment between HR and strategy as being crucial for exceptional business performance, a question that remains is how this fit can actually be achieved. Despite numerous contributions which have demonstrated a positive impact of HR on organizational performance, a great deal of uncertainty around the nature of this linkage remains. In line with the call for a more strategic approach of the HR department, studies are needed to understand how HR practices can support business strategy and ultimately enhance firm performance. Purpose The purpose of this study is to explore the linkage between HRM and performance to understand how HR practices can support business strategy and ultimately enhance firm performance. Additionally, potential gaps will be identified and a theoretical explanation, grounded in the conducted data, will be suggested. Methodology A qualitative approach was chosen for this exploratory study. The empirical data was conducted in 25 in-depth interviews within one case organization and an inductive approach of theory-building through the collection of rich empirical data was applied. Results It was shown that expectations towards HR were closely linked to the HR transformation model as one commonly used best practice approach in many organizations. However, HR best practice models are often developed far away from the organizational context and bear a high risk to fail to achieve the intended outcome. As this study suggests, they should be assessed regarding their fit for the particular organization and contextual factors have to be taken into account at the implementation stage. Existing gaps between intended positive effect on the business and organizational reality were related to clashing institutional logics both within and across two institutions, i.e. the HR department and line managers. Institutional theory emerged as a potential explanation for these gaps. This concept underlines the importance of colliding inherent norms and behavioral patterns and emphasizes organizational actors (first and foremost HR professionals and line managers) and the institutional context they are placed in as crucial factors for successful transformation.