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date: 20 November 2017

Human Resource Management and Organizational Psychology

Summary and Keywords

Human resources (HR) management addresses those policies, practices, and activities concerned with the management of people in organizations. Although it is typically considered at multiple levels of analysis, it provides an important context for the application of work and organizational psychology. Core research questions address the determinants of HR strategy and practices adopted by organizations and how these are linked to outcomes including in particular organizational performance and employee wellbeing. Much research explores this linkage process including how far HR practices are able to ensure employee abilities, motivation, and opportunities to contribute; the distinctive role of human capital; how employees react to these practices; and the steps management can take to ensure their effective implementation. Most research confirms an association between the adoption of a greater number of what are typically termed “high performance” or “high involvement” HR practices and higher organizational performance and employee wellbeing. However, doubts remain about the causal direction of the association. Continuing research challenges include how best to measure HR practices, understanding more about contextual influences, and incorporating more fully the role of employee attitudes and behavior including employee attributions about the motives of management in their use of HR practices.

Keywords: human resources management, organizational performance, employee wellbeing, human capital

Introduction

Human resources management (HRM) can be broadly defined as “all those activities associated with the management of work and people in organizations” (Boxall & Purcell, 2011). It serves as a focus of study but also as an occupation for specialists and a day-to-day component of the work of line managers. HRM is a relatively new area of study, but research has burgeoned in recent years, and this article will examine some of the central research debates and research findings.

HRM may not at first sight appear to be an obvious candidate for inclusion under the banner of work and organizational psychology. It is, after all, a multidisciplinary area of research, often conducted at the organizational rather than the individual level of analysis. But it also incorporates many of the core activities typically associated with work and organizational (W/O) psychology ranging from topics such as selection and training to outcomes such as wellbeing, absenteeism, and labor turnover. It therefore serves as an integrative context within which to consider the work of W/O psychologists. At the same time, HRM has emerged as a major field of theorizing and research in its own right, with several specialist academic journals and large numbers of practitioners who label themselves as HR professionals, and it offers the promise of some integration across disciplines and across levels of analysis.

The article starts with a brief overview of influences on the emergence of HRM, emphasizing those disciplinary perspectives that lie beyond the usual territory of W/O psychology. Subsequent sections examine the nature of HRM, the kind of outcomes it is expected to influence, and the processes whereby HRM and outcomes might be related. Each of these is a continuing focus of theorizing and research. In each section, conceptual and empirical issues and evidence will be reviewed.

Disciplinary Influences

Three broad disciplinary perspectives have been particularly influential in informing the development of HRM theory and research. The first, reflecting the historical traditions of the application of HRM, is the sub-discipline of industrial relations. The second is the influence of business strategy, reflecting the location of some researchers in business schools and the potentially important role of effective HRM for business performance. The third influence is W/O psychology and the overlapping field of organizational behavior.

The practice of what we now describe as HRM emerged in the early decades of the 20th century. Those working in the field were initially described as welfare officers and then personnel managers. When there was a need to address industrial conflict, the role of the industrial relations manager increasingly came to the fore. In the 1930s, the study of industrial relations and, more broadly, relations at work began to emerge within universities. Well-known examples over the decades include the Hawthorne studies (Roethlisberger & Dickson, 1939), the work of Whyte (1955) and others on the role of pay and restriction of output, and Walton and McKersie’s (1965) behavioral theory of labor negotiation. Those engaged in this type of research typically had backgrounds in sociology, economics, or psychology, providing an early multidisciplinary perspective. Topics for research included forms of industrial conflict ranging from strikes to absenteeism, systems for alleviating or preventing conflict such as collective bargaining, systems for workers’ participation and the influence of pay on behavior. By the 1970s, there were flourishing departments of industrial relations in universities in many countries, undertaking research and providing education to those seeking to pursue a career in industrial relations or personnel management. By the 1980s, patterns of industrial conflict began to change and eventually diminish, and academic industrial relations departments entered a slow decline, though several prominent journals remained. A number of researchers who once worked in these departments switched their research focus to HRM, often providing some of the most trenchant critical analysis of the field (see, e.g., Godard, 2004).

The influence of business strategy on HRM began to emerge in the 1980s. A major factor in this was the growth of teaching and research in the business schools, particularly in the U.S. The initial argument, proposed in general normative terms, most notably by Porter (1985), but applied to HRM by, for example, Miles and Snow (1984) was that organizations had strategic choices about how to compete, and this should influence the approach organizations adopt to HRM. The most obvious distinction was whether to compete on the basis of cost minimization or some combination of quality and innovation. Each required rather different ways of managing people at work. A clear exposition of this was outlined by Schuler and Jackson (1987) who set out five steps. First, an organization has to clarify its mission and values. Second, and building on this, it has to determine its competitive strategy. Third, it needs to determine the kinds of employees and the sorts of behavior that will enable the strategy to be achieved. Fourth, the organization needs to determine the HR policies and practices that will help to ensure that the right employees are performing appropriately. Finally, organizations should check that employee behavior is actually aligned with the strategic goals.

Further interest in HRM from a strategic perspective was provided by advocacy of the resource-based view of the firm (Barney, 1991). This argued that to compete effectively, organizations needed to acquire and utilize resources that are rare, expensive, hard to replace, and not easily replicable. Part of the analysis, developed further by Barney and Wright (1998), was that human resources fitted these criteria better than other resources such as finance or machinery, which could more easily be copied. This boosted the idea of employees as “human resources,” a term that causes distaste in some quarters.

The resource-based view of HRM placed considerable emphasis on the economic concept of human capital (Nyberg & Wright, 2015). For example, Lepak and Snell (1999), argued that organizations need to invest heavily in attracting, retaining, and utilizing “human capital” that is highly unique to the firm and highly valuable. In contrast, human capital that is valuable but plentiful is best acquired, perhaps by being brought in. Where human capital is unique but of low strategic value, it might be best to form an alliance. Finally, human capital that is low in value and uniqueness is perhaps best contracted in. This might appear to be a cost-effective strategy, and research has shown the benefits of a selective approach (Lepak & Snell, 2002). However, Peel and Boxall (2005) found that seeking to classify human capital is far from straightforward and likely to vary from firm to firm. We return to the topic of human capital later in the article.

The third major source of influence on HRM comes from work and organizational psychology and (OB) organizational behavior (hereafter just W/O psychology). The reason for this is straightforward; HR practices such as selection, training, appraisal, and reward are the bread and butter of the research and practice of W/O psychologists. HR practitioners are constantly on the lookout for the best practices to apply, and it is the W/O psychologists who undertake the research that provides them. Although the picture is mixed, many W/O psychologists and most of those who use the OB label now work in business schools and, with an interest in effective management, this makes the field of HRM a natural context for their research and consultancy. At the same time, W/O psychology has a particular focus on individual and group behavior and associated outcomes. This has helped to promote a more employee-centered, micro-level focus to HRM.

A distinctive feature of HRM is its ability to integrate features of the macro strategic perspective with the more micro-level perspective typically adopted by psychologists. Indeed, writers such as Wright and Boswell (2002) have argued that some integration of macro and micro areas is essential for the field to develop. A feature of an integrated perspective, and a key argument of advocates of HRM (see, e.g., Becker & Huselid, 1998; Jackson, Schuler, & Jiang, 2014), is that HRM should be viewed as a system. What this implies is that it is not enough to focus on selection, training, rewards, or job design; it is necessary to view the whole range of HR practices as an integrated whole and to ensure that they are aligned to provide “internal fit.” If this approach succeeds, there should be a kind of gestalt whereby the sum is more than the parts.

The dominant research topic has been the relationship between HRM and outcomes, and in particular, organizational performance. However, researchers are increasingly exploring the relationship with employee wellbeing and the feasibility of mutual gains (Van de Voorde, Paauwe, & van Veldhoven, 2012). Some years ago, Guest (1997) noted that if research on HRM is to progress, there needs to be clearer theory and research concerning the nature and measurement of HRM, of outcomes and the nature of the relationships among them. Since then, either directly or indirectly, much of the research has addressed these three core issues. In the following sections, we consider each of these in turn.

The Nature of HRM

A major and continuing challenge for research has been how to conceptualize and operationalize HRM. There are several interrelated issues that need to be addressed. What HR practices should be included in the general field of HRM? What is the underlying rationale for including specific practices? How much detail is required about each practice? Can and should practices be combined in any kind of bundles? Who should provide information about them? And what kinds of response categories are appropriate? All these questions have provided the focus for extensive conceptual and empirical work.

Diversity in Conceptualizations of HRM

In several earlier articles on HRM, it was conventional to identify four broad topics that reflected the field. These were recruitment and selection, training and development, performance appraisal, and rewards (see, e.g., Fombrun, Tichy, & Devanna, 1984). However, this list omitted a range of issues concerning the employment relationship, such as job security, communication, and flexible work arrangements. Writing for general managers at Harvard, Beer, Spector, Lawrence, Quinn Mills, and Walton (1985) suggested that broad core topics that needed to be addressed included employee influence, human resource flows, reward systems, and work systems. These two differing approaches highlight the scope for diversity when studying HRM. It is therefore perhaps not surprising that when Becker and Gerhart (1996) reviewed the existing studies, they found a wide variety of practices being measured. Indeed, no one practice appeared in every study they reviewed. Several years and many studies later, two extensive reviews (Boselie, Dietz, & Boon, 2005; Combs, Liu, Hall, & Ketchen, 2006) found that little had changed with respect to the variety of practices used in studies. There was also considerable difference in the number of practices used; indeed, Combs et al. found that the number ranged between 2 and 13 with an average of 6.2. The variety of practices used to measure HRM makes comparison across studies highly problematic. This has not stopped such comparisons being made, notably in meta-analyses.

Alternative Rationales for Determining the Content of HRM

There has clearly been a need to find some underlying rationale to determine which practices should be included in any study. One approach has been to focus on external and internal fit. In the case of external fit, as Porter (1985) and Schuler and Jackson (1987) have argued, the starting point is to determine the mission, values, and core goals of the organization and then determine its competitive strategy. Since the main goal of most private-sector organizations is to maximize financial performance, it is those HR practices that help to achieve this that should be included. As researchers have accepted this logic, one consequence has been a change in language, so that many studies now don’t refer to HR practices, but rather to high-performance work practices (HPWPs).

In public sector organizations, the mission and values may be rather different, and the concept of competitive strategy may be inappropriate. Furthermore, as Paauwe (2004) and others have pointed out, in Europe, with its focus on social partnership, legislation at European and national levels requires the application of a range of HR practices to promote issues such as health and safety at work, equal opportunities, and flexible working. Partly reflecting this perspective, and acknowledging the roots of HRM in the industrial relations tradition, scholars have outlined alternative bases for determining appropriate HR practices. In the U.S., Walton (1985) argued that effective management of the contemporary workforce requires a shift from policies and practices seeking control to those that promote employee commitment. This has led to advocacy of what is termed high commitment (Wood & Albanese, 1995) or high-involvement HRM (Boxall & Macky, 2009). These terms suggest a rather different approach, reflected in the writing of Beer et al. (1985) that recognized the legitimacy of outcomes of concern to employees and other stakeholders.

One problem with an approach to HRM that starts from mission, values, and stakeholder interests is that it still leaves open the choice of practices and it does not clearly specify how those practices should be deployed. Therefore, though there can be agreement about the need to include practices such as selection and training, the specific features of such practices can remain unclear. For example, selection can be measured through the use of certain types of psychometric tests or the use of assessment centers. Alternatively, it can be measured in relation to its aims, such as by hiring those who demonstrate immediate competence in a specified job or those with a positive attitude toward learning. The complexities and choices in measuring these variables are familiar to W/O psychologists. The problem in measuring them in the context of HRM is that each practice is just one among several. As a result, it is not surprising that researchers have measured a wide and varied range of practices, and have done so in often rather different ways.

Internal Fit and the Role of HR Bundles

The aim of internal fit is to identify sets of HR practices (sometimes described as bundles) that will complement each other. The most frequently cited approach to achieve this is the so-called AMO model. This draws on Lawler’s (1971) expanded version of expectancy theory. While expectancy theory proposes that motivation is a function of the perceived links among effort, performance, and rewards, Lawler extended this to propose that effective performance also depends on individuals having the appropriate ability and role. Applying this to HRM (Becker, Huselid, Pickus, & Spratt, 1997; Guest, 1997) it is suggested that the immediate goals of an HR system designed explicitly to ensure high performance are to ensure that employees have the ability (A), motivation (M), and opportunity (O) to contribute effectively. HR practices required to achieve these goals can then be clustered together in three broad bundles. For example, ability or competence may be generated through appropriate selection, training, and development practices. The quality of these practices can be greatly enhanced by building on the evidence base developed by W/O psychologists. However, this approach is not without its challenges. For example, there are potential substitution effects—should the focus be on selection of competence or the training of competence? Furthermore, some practices, including those linked to job design, can have an impact on both motivation and opportunity to contribute, thereby blurring the bundles.

The concept of bundles can also present a challenge for psychologists who have typically developed expertise in specific practices, since the argument concerning internal fit suggests that it is not enough to focus on practices that develop one of these outcomes because they are all important. For example, it is not helpful to have highly motivated but incompetent employees or to have highly competent employees who have no opportunity to use their knowledge and skills. So the notion of internal fit within an HR system implies that there need to be HR practices present that can contribute to each element of the AMO model.

Meta-analyses by Jiang, Lepak, Hu, and Baer (2012) and Subramony (2009) tested models based on the three AMO bundles of practices and also tested a single integrated measure of HRM. They found a better fit with the three bundles. Furthermore, each was associated with somewhat different outcomes. This is further support for the view that all three bundles need to be present to have a full impact. Subramony found that opportunity to contribute and motivation had a stronger impact than human capital, which on its own was non-significant. On the other hand, Jiang et al. found that each bundle on its own had a modest but significant impact on financial outcomes. Reflecting this, subsequent research has shown that human capital on its own can improve employee behavior and organizational performance (Crook, Todd, Combs, Woehr, & Ketchen, 2011). But the impact is not as great as the application of the three bundles. This is somewhat akin to research on the impact of selection and training effects that has consistently shown that high-quality application of both practices can enhance and benefit individual performance. When this is aggregated to the unit or organizational level, we might expect an impact on organizational performance (see, e.g., Aguinis & Kraiger, 2009; Schmidt & Hunter, 1998). Nevertheless, Subramony (2009) also showed that each bundle made a stronger contribution than any individual practice. Given these competing results, further research needs to establish the relative importance of individual HR practices, bundles of practices, and an aggregated measure.

Human Capital

Recent theorizing and research have given considerable prominence to the concept of human capital and the specific bundle of HR practices associated with it. As originally conceived by Becker (1964), the concept was quite wide-ranging and covered the knowledge and skills of individuals and also their information, ideas, and health. Ployhart and Moliterno (2011) have distinguished between cognitive abilities and other individual characteristics like personality, interests, and values, all of which, as they acknowledge, are typically considered at the individual level. However, they outline enabling factors such as task complexity and interdependencies that create conditions where these types of capital can be aggregated to the unit level and analyzed with respect to their impact on unit performance. Researchers have begun to consider human capital at the unit level as a collective set of capacities for management to utilize (see, e.g., Ployhart, Nyberg, Reilly, & Maltarich, 2014) and Nyberg and Wright (2015) argue that it offers an opportunity for multidisciplinary as well as multilevel research. Although interest in human capital is generating a large body of research, it is potentially limited by its focus on one element, the A within the AMO model.

Levels of Detail about HR Practices

After a decision about which HR practices to include in any study, there remains the issue of how much detail to seek. For example, it is possible with respect to training to ask about the presence of a training policy, hours of training provided, off-the-job versus on-the-job training, and so on. Indeed, the amount of formal training provision is one of the most frequently included items in studies of HRM. However, this is not without problems since it might refer to a goal to provide specified hours, it might refer to off-the-job formal training but ignore informal and incidental learning, and it may apply to only some of the employees. In short, even if the relevant HR practices can be identified, there are unresolved research questions about the level of detail and how far this should be standardized across practices.

Sources of Information about HR Practices

A further and increasingly widely researched question is who should provide information about HR practices. Researchers have noted a gap between intended and implemented practices (Khilji & Wang, 2006), and among those concerned with the impact of HRM on outcomes, it is argued that effective implementation is more important than the presence of a policy or practice (Bowen & Ostroff, 2004). Senior managers in HR departments may report that a practice such as universal annual appraisal is a firm company policy. However, employees will be in a better position to report whether they have actually received an appraisal in the past year or whether they have perceived and are actually aware of specific policies and practices even if they have not directly experienced them. An example might be policies and practices related to bullying and harassment. Therefore, while much of the research on HR practices has obtained information from senior managers, there is a strong case for collecting information from employees. This may not only increase accuracy, but also enhance reliability. However, the attractions of collecting data from senior managers include the ability to compare across many organizations and to collect data swiftly at an organizational level to permit assessment against organizational-level outcomes. While it is possible to aggregate employee data, collecting such data across many organizations is a complex and time-consuming activity. An alternative is to focus on an important category of employees and ask about the HR practices that apply to this group. This can offer some advantages in accuracy over asking about the workforce as a whole, but it risks ignoring the HR practices applied to the remainder of the workforce.

Response Categories for HR Practices

Researchers need to give consideration to the choice of response categories when collecting information about HR practices. Once again, the published research displays a wide range of approaches. In many cases, the logical response categories will be a straightforward “Yes/No” as in responses to questions such as “Have you received an appraisal in the past 12 months?” An alternative is to turn these questions into statements and use a Likert scale, typically from “strongly agree to strongly disagree,” which permits a factor analysis of the responses, but also invites potentially inaccurate responses to categorical items. When the questions are directed to managers, an alternative to asking for categorical answers is to ask about the percentage of workers who are likely to have experienced a particular practice. This permits a more flexible response, although the accuracy of such responses is open to question and they present potential problems of aggregation, particularly if different practices apply to different categories of employees. There are therefore choices concerning the approach to adopt for response categories, with no consensus in sight.

Aggregating HR Practices

A final issue concerns how to aggregate practices. This issue was first addressed some years ago by Delery and Doty (1996) who tested competing theories and different ways of combining data to address both external fit, through a contingency approach linking practices to strategy, and internal fit, based on a simple count of practices in place and a configurational model that examined interactions between bundles of practices. It was found that there was no clear advantage to a configurational model. Subramony (2009) and Jiang et al. (2012) also found no consistent evidence that one bundle in the AMO model or that any combination of A, M, and O is superior in terms of its impact. Interestingly, this is similar to the findings in a meta-analysis of expectancy theory (van Eerde & Thierry, 1996). The most widely used approach over the years has been to provide a count of the practices that are reported to be present on the grounds that a greater number of practices indicates the strength of the HR system and therefore increases the likelihood that they will have an impact. Although this is a plausible argument, it ignores the likelihood that certain practices will be more important than others. It also supports a universalist model that holds that the same broad set of practices applies, irrespective of the context and strategy, a view that is not well supported by the research and that supporters of contingency theory find inherently implausible.

Identifying and Measuring HR Practices: A Summary

This brief overview has shown that there are major problems in conceptualizing and operationalizing the presence and application of the HR practices that constitute the HRM system. Much of the difficulty can be attributed to the complexities that arise from the lack of clear definitions of the content and boundaries of any HRM system, from the variety of perceived goals of the system and therefore the practices that deserve priority, and from the various levels of analysis at which the research is undertaken. These challenges are of a different order than those faced by W/O psychologists who have typically focused more narrowly on a specific practice at the individual or group level. However, the lesson of HRM for W/O psychology is that this type of detailed focus needs to be understood in its wider context, recognizing the risk that a specific practice can act as a proxy for a wider set of practices unless some way can be found of controlling for their influence. Researchers need to be clear about the underlying rationale for the kind of HRM they are exploring and be explicit about the reasons certain HR practices are included and what assumptions are being made about aggregation. Too many studies have lacked a theory or even an explanation for their choices of practices. It is also worth noting that the research, with its focus on HR practices likely to enhance performance, omits a number of important topics that are likely to be of interest to employees and have been the focus of extensive research by W/O psychologists, such as the role of careers and career management, equal opportunities, and work-life balance. Despite all the problems of identifying and measuring HR practices, and the unreliability that the diversity of practice indicates, the large body of research, reflected in the various meta-analyses (see, e.g., Combs et al., 2006; Jiang et al., 2012) consistently reveals a positive association at the organizational level between the use of more HR practices and financial outcomes.

The Outcomes of HRM

Most of the early research was concerned with the relationship between HRM and organizational performance and was conducted at the level of the organization. For example, in the early seminal study by Huselid (1995) who surveyed leading U.S. companies, outcomes included aggregated labor turnover and productivity, but the main focus was on various financial indicators, including market value of shareholder equity. In Jiang et al.’s (2012) meta-analysis, the main dependent variable was financial performance reflected in a variety of measures, including return on assets, return on equity, and a general measure of overall financial performance. The problem with the use of financial indicators is that they are subject to a wide variety of influences, including the vagaries of the economic system. Therefore, as a distal outcome, the size of the association with HRM is always likely to be quite weak. An alternative is to utilize more proximal measures that are organizationally relevant in the sense that they could have a financial impact but are more likely to be influenced by HRM. In other words, they can provide a test of mediation. This has led to the use of outcomes like labor turnover, productivity, and service quality. Two early studies in strip steel mills (Arthur, 1994; Ichniowski, Shaw, & Prennushi, 1997) explored the link between HRM and productivity. However, productivity has proved particularly challenging to measure, especially in the service sector, and in their meta-analysis, Combs et al. (2006) found that there was a stronger association between HRM and financial performance than between HRM and productivity. What this perhaps illustrates is that there are questions concerning both the reliability and validity of these outcome measures.

Identifying outcome measures can become greater at the unit level rather than the organizational level. One way of addressing this has been to obtain subjective assessments of outcomes from managers. This is the approach that has been adopted over the years by the British Workplace Employment Relations surveys that collect data from about 2000 workplaces (see van Wanrooy et al., 2013). They ask managers to rate their performance on a variety of criteria against competitors they know about in the same sector. Analyses of the results where it is possible to compare against independent financial reports (e.g., in single unit organizations) show that there is a modest positive association between the subjective and more objective indicators (Forth & McNabb, 2008; see also Wall et al., 2004). However, in their meta-analysis, Combs et al. (2006) reported higher associations between HRM and performance where subjective rather than objective indicators of performance are used. There are some sectors where unit-level comparisons are feasible, including retail and banking, because organizations have a large number of more-or-less identical branches. Similar arguments are increasingly made about public-sector organizations such as hospitals and local authorities, and benchmarking has become popular based on assumptions about the validity of such comparisons. For relevant research on hospitals, see Givan, Avgar, and Liu, (2010) and West, Guthrie, Dawson, Borrill, and Carter (2006), and for local authorities, see Messersmith, Patel, Lepak, and Gould-Williams (2011).

Psychologists have been more interested in employee outcomes, and a growing number of studies explore the relationship between HRM and employee attitudes, behavior, and wellbeing. The choice of measure depends on whether the primary interest lies in organizational performance or employee wellbeing. In the case of the former, it can include individual-level performance, organizational citizenship behavior, absence, and labor turnover. When the main interest is in wellbeing, outcome measures include psychological contract fulfillment, perceptions of employment security, and perceived organizational support, as well as measures of stress, burnout, and engagement, and standard measures of job satisfaction and wellbeing (for a review, see Clinton & van Veldhoven, 2013). Almost all the research shows a positive association between the presence of more HR practices and more positive employee responses (see Clinton & van Veldhoven, 2013). However, a small minority of studies have revealed increases in levels of stress (see, e.g., Ramsay, Scholarios, & Harley, 2000). This has led critics such as Godard (2004) to argue that HRM is bad for workers because it is likely to result in work intensification and the consequent stress.

Although the evidence of negative consequences for employees is weak, the topic has generated interest in the extent to which HRM is associated with both higher organizational performance and improved employee wellbeing. The relatively few reported studies in which both have been measured have been reviewed by van de Voorde, Paauwe, and van Veldhoven (2012) and Peccei, van de Voorde, and van Veldhoven (2013). They find that the presence of more HR practices is associated with both higher performance and higher job satisfaction and organizational commitment. However, the evidence from the very few studies that have included health-related wellbeing measures, mainly indications of stress, is somewhat more equivocal, revealing a mix of positive, neutral, and negative outcomes for employees. It is unclear whether the studies with more negative results were utilizing high-performance work systems to enhance performance or high-commitment/high-involvement approaches that give higher priority to employee roles and outcomes. Future research exploring this issue will need to be clearer about the HRM strategy that underpins the type of practices adopted.

In summary, the research on HRM has predominantly explored outcomes that reflect organizational and managerial interests associated with performance. These have often been quite distal measures, such as financial performance, and have usually been collected at the organizational level. A smaller stream of research has explored employee outcomes like job satisfaction and wellbeing. As more proximal measures, these might be expected to reveal a stronger association with HRM. Relatively few studies have explored both organizational and employee outcomes. Those that have done so tend to show mutual benefits, but the results are somewhat inconsistent and seem to depend in part on the type of employee outcome under investigation. This is an area that would benefit from further research.

Understanding the Relationship between HRM and Outcomes

The early research was primarily concerned with establishing a relationship between HRM and organizational performance, but much of the focus shifted to seek explanations for how or why there appears to be an association. The relatively limited body of research exploring the role of external fit of HR practices with the business strategy has failed to show any consistent impact on outcomes (Jackson, Schuler, & Jiang, 2014). Instead, most subsequent research has been based on internal fit and development and testing of linkage models. These typically propose that HR practices influence employee perceptions that in turn affect employee attitudes and behavior and subsequently employee performance. This can then be aggregated to proximal (e.g., productivity, service quality) and distal (e.g., financial) organizational performance. Elements and sometimes a complete linkage model have been tested, and research has typically reported support for the expected associations indicating full or partial mediation. The AMO model has been the most extensively tested, and the meta-analysis by Jiang et al. (2012) provides a good example of this. They linked measures of the HR bundles to indicators of human capital and motivation, and linked those in turn to labor turnover and internal measures of performance, and finally linked both of those to financial performance. They reported good evidence for these linkages and for partial mediation.

The AMO model suggests that HR practices succeed by leveraging employee behavior. Alternative models based on high-commitment or high-involvement rather than high-performance HRM utilize social exchange theory (Gong, Chang, & Cheun, 2010; Piening, Baluch, & Salge, 2013). The core argument is that if HR practices are used to enhance the commitment and involvement of employees and to ensure a positive employment relationship, this will in turn be positively perceived by employees at both an individual and collective level. It might, for example, be perceived in terms of fulfillment of the psychological contract (Rousseau & Greller, 1994) or in the form of perceived organizational support (Eisenberger, Cummings, Armeli, & Lynch, 1997). Based on the norm of reciprocity (Gouldner, 1960), employees can be expected to respond with positive attitudes and behavior. Research supports these linkages and shows an association with organizational commitment, organizational citizenship behavior, higher individual performance, and a lower propensity to quit the organization or be voluntarily absent (e.g., Kehoe & Wright, 2013; Takeuchi, Chen, & Lepak, 2009). Overall, therefore, there is consistent support for a linkage model. More research is needed to test competing explanations for these linkages and to understand why the strength of the association varies. Some issues, to which we now turn, offer possible explanations.

The Role of Employee Attributions

As the role of employees takes center stage in the analysis of the impact of HRM, it is recognized that to understand the effect of HRM on attitudes and behavior, it is first necessary to consider how employees perceive HR practices. Researchers have begun to use a form of attribution theory to explore how employees interpret management motives for adopting certain HR practices and to examine how their interpretation affects their attitudes and behavior. Nishii, Lepak, and Schneider (2008) researched attributions among employees in a large Japanese retail chain. They hypothesized that if employees attributed management’s use of HR practices to a desire to enhance quality of service or employee wellbeing, then the response would be positive and would, in turn, have a positive effect on customer service. In contrast, if they were attributed to management’s desire to enhance control over employees or to intensify work, then these negative attributions would feed through into less enthusiastic employee behaviors that would be reflected in customer evaluation of service quality in the branches. Their findings supported these hypotheses. Subsequent research by van de Voorde & Beijer (2015) tested the impact of wellbeing and performance attributions on individual employee outcomes and found that, as predicted, wellbeing attributions had a positive impact on commitment to the organization and on employee wellbeing, reflected in lower levels of job strain, whereas performance attributions resulted in higher levels of job strain. Both studies confirm the importance of understanding employee attributions in any model seeking to explain the links between HRM and outcomes.

Research on employee attributions highlights the potential role of signaling theory (Connelly, Certo, Ireland, & Reutzel, 2011), a variation on communication theory. To put it at its simplest, what do HR practices, singly or in combination, signal to employees? Rousseau and Greller (1994) used signaling theory to explain how HR practices communicated to workers the content of the psychological contract. Signaling theory formed the basis for an influential conceptual article by Bowen and Ostroff (2004) concerning the implementation of HRM. They support the view that it is not sufficient to have good HR practices in place; implementation is only likely to be effective if management can clearly signal the intentions behind the HR practices. They argue that this is more likely to be achieved when there is what they call a “strong” HR system. They hypothesize that this will entail three features that need to be clearly signaled: high consensus, implying agreement among the relevant stakeholders about the viability and fairness of the HR practices; high distinctiveness, implying that HR practices should be visible, understandable, and relevant; and high consistency, implying that HR practices complement each other and are seen as aiding goal achievement. Bowen and Ostroff’s approach suggests that strong leadership signaling support from the top of the organization is required to ensure a strong HR system and therefore an increased likelihood of effective implementation of HR practices.

Researchers have begun to test Bowen and Ostroff’s propositions. A first step has been to develop measures of the three core components and the sub-elements that Bowen and Ostroff outline (see, e.g., Delmotte, De Winne, & Sels, 2012; Coelho, Cunha, Gomes, & Correia, 2015). A second step has been to test the validity of the model by studying the association of the dimensions with performance outcomes (see, e.g., Sanders, Dorenbosch, & De Reuver, 2008; Li, Frenkel, & Sanders, 2011; Pereira & Gomes, 2012). The results of these studies highlight the complexity of the model, suggesting that it would benefit from some simplification. Secondly, they indicate that the distinctiveness dimension appears to be more important than the other dimensions, and that the relative importance of the three dimensions of HRM system strength seems to vary across studies and perhaps across national cultures. Despite the enthusiasm with which some researchers have been exploring the Bowen and Ostroff model, there may be a case for revisiting some of the underlying dimensions.

The HR Implementation Process and Actors

Research on attribution theory, signaling theory, and the strength of the HR system is concerned with HR implementation. It is based on recognition that the presence of HR practices is not enough to ensure that they have an impact. A related stream of research has explored the process of HR implementation by focusing more directly on the roles of the main actors. Guest and Bos-Nehles (2013) have outlined a descriptive framework that implicated several parties in the implementation process. Top management and senior HR managers have responsibility for deciding whether certain practices should be present. HR managers, perhaps with outside help from consultants and W/O psychologists, shape the quality of the practices. Line managers, with support from local HR managers, have to implement practices on a day-to-day basis, and in addition they need to be motivated to ensure that they are implemented in a high-quality rather than a ritualistic way. Finally, their impact depends on employees’ perceptions of and attributions about the practices. There has been some concern that line managers may be a weak link in this process. Case studies led Hope Hailey, Farndale, and Truss (2005) to conclude that in the U.K., line managers were neither willing nor able to accept their HR implementation role. In contrast, Bos-Nehles (2010) found that Dutch managers were motivated to ensure effective implementation of HR but often lacked the time to do so (Bos-Nehles, 2010). A study of the implementation of policy and practice to address bullying and harassment in healthcare (Woodrow & Guest, 2014) found that although best HR practices were in place, they were invariably poorly implemented due mainly to lack of senior management support, but also to employees’ perceptions that the HR systems were ineffective in helping to resolve incidents of bullying and harassment. This would appear to support Bowen and Ostroff’s argument about the need for a strong HR system with top-level support.

The interest in HRM implementation has increased the focus on the role of HR specialists. There has been a longstanding stream of research on the role of HR managers reflecting concerns about their lack of power and influence (see, e.g., Legge, 1978; Ritzer & Trice, 1969; Guest & King, 2004). In a highly influential attempt to boost the role, Ulrich has presented a stream of writing and research outlining evolving ideas about the HR department structure, the various HR roles, and HR competencies required for effective performance by HR professionals (see Ulrich, 1997; Ulrich & Brockbank, 2005: Ulrich, Younger, Brockbank, & Ulrich, 2013). Underpinning his research was a desire to see the HR function contributing to effective HR implementation or, as he expressed it, moving from “doing” to “delivering.”

Ulrich’s ideas generated considerable excitement among HR professionals in several countries, resulting in a rush to implement them. However, they have also been the subject of extensive conceptual critiques (see, e.g., Caldwell, 2008) and empirical research (see, e.g., Buyens & De Vos, 2001; Wright, 2008), raising serious questions about the feasibility of implementing them beyond the context of large, predominantly U.S. private-sector organizations, something Ulrich himself recognized. Nevertheless, his work is important in highlighting the role of HR professionals who often serve as gatekeepers for the application of the research of W/O psychologists in organizations.

The Role of Individual Differences

As psychologists have become more interested in HRM, attention has begun to focus on individual differences. One illustration of this has been a broadening of the conceptualization of the characteristics that constitute human capital, reflected in the work of Ployhart and Moliterno (2011), including the role of personality and values as human capital. Another stream of research has been considering age and the question of whether specific HR practices or bundles of practices have a greater impact at different ages. The rationale for expecting that this might be the case draws on selection, optimization, and compensation (SOC) theory (Baltes, Staudinger, & Lindenberger, 1999). For example, Bal, Kooij, and De Jong (2013) and Kooij et al. (2013) have shown how developmental HR practices among younger workers and accommodative HR practices among older workers can enhance commitment and wellbeing. There would appear to be room to extend this approach to consider other individual differences such as gender and education, but also variations in employment circumstances like temporary employment and other forms of employment flexibility. For example, what sort of HR practices are most suitable for long-distance workers including those working from home?

The Use of Multilevel Analysis

Bowen and Ostroff’s (2004) model builds on previous work by Ostroff and Bowen (2000) in arguing for a multilevel approach for understanding HRM processes and their impact. Ployhart and Moliterno (2011) make a similar point with respect to the aggregation of human capital. There is a strong case for multilevel analysis when employee attitudes and behavior form part of the study but the primary concern is with organizational performance, something that has become relatively common in recent research (see, e.g., Liao et al., 2009; Messersmith et al., 2011; Piening, Baluch, & Salge, 2013). Another context is when moderating variables are hypothesized to affect outcomes, requiring the use of moderated mediation. The kinds of moderating variables that have attracted most research attention are organizational climate and leadership, but there is room to extend this type of research to consider a potentially wide range of moderating variables, including exogenous factors like business sector and market conditions.

Comparative HRM

HRM is potentially a very broad field, and its extensive scope can be illustrated through the large body of research and writing on comparative HR systems. While most multilevel analysis uses the organization as the highest level of analysis, a distinct body of research has explored HRM at the country level. This research studies comparative HR systems and the impact of national institutions and cultural factors in shaping the kind of HR practices that are likely to be acceptable and have impact. European countries typically have a stronger institutional framework, including legislation that requires certain practices to be in place. In a country such as the U.S., organizations have fewer constraints on the HR practices they can choose whether or not to apply. Along with the major comparative studies of national cultures and leadership, the Cranet project (see, e.g., Mayehofer & Brewster, 2005) has for years been conducting standard surveys in many countries collecting data on HR practices, the structure of the HR function, and perceptions of impact. Rabl, Jayasinghe, Gerhart, and Kuhlmann (2014) have analyzed country differences in the strength of the HRM-performance relationship across studies reported in 29 countries. Although in all cases, the associations were positive, there were wide country differences in the average strength of the association, and their hypotheses about the influence of two dimensions of national culture, namely tight-loose properties and degree of flexibility, were not supported.

In policy terms, research on comparative HRM is particularly relevant for international organizations sending managers on overseas assignments. Schuler, Dowling, and De Cieri (1993) have provided an integrative framework within which to consider international HRM, including overseas assignments. Black and Mendenhall (1990) have explored issues in selection and more particularly cross-cultural training methods, while Black, Mendenhall, and Oddou (1991) have outlined the steps necessary for effective adjustment to an overseas assignment. Doherty, Dickmann, and Mills (2011) have explored motives among company-initiated and self-initiated overseas assignments, while Bolino (2007) has analyzed the implications of such assignments for career success. Comparative HRM therefore provides a good example of how HRM research can be considered at different levels of analysis, from different disciplinary perspectives, and from both conceptual and applied perspectives.

The Importance of Longitudinal Research

Much of the reported research linking HRM and outcomes has been cross-sectional, raising questions about causality and leading to calls for longitudinal studies. Researchers have begun to answer this call. Birdi et al. (2008) examined the impact of three HR practices (training, teamwork, and empowerment) and four operational practices (total quality management, just-in-time, supply chain management, and advanced manufacturing techniques) on productivity in a large sample of manufacturing firms over a 22-year period. They found a positive impact of HR practices but not operational practices, and they also found no interaction between them. They reported a lengthy time lag of several years before any impact was significant. In contrast, Piening, Baluch, and Salge (2013), in a longitudinal study in healthcare, found support for a causal chain from employee perceptions to changes in job satisfaction to changes in patient satisfaction. However, they found that the impact was greatest in the first year and diminished thereafter. The longitudinal study in healthcare by West et al. (2006) reported a more direct association between the presence of more HR practices and mortality rates after controlling for a range of other potential influences.

Longitudinal studies have generally supported a causal ordering whereby HR practices affect outcomes. However, they have rarely considered the possibility of reverse causality. The potential for reverse causality is based on the assumption that high performance and, in particular, high financial performance create room for investment, including investment in human resources. There is also the possibility that working for a successful organization is a source of satisfaction that in turn further enhances performance, a conclusion that might be drawn from the longitudinal study of company-level performance and job satisfaction over a number of years reported by Schneider, Hanges, Smith, and Salvaggio (2003). In the context of HRM, Guest, Michie, Conway, and Sheehan (2003) reported an association between HRM and subsequent financial performance. However, when they controlled for prior performance, this association disappeared, raising questions about the causal ordering. It also raises wider questions about the size of impact of HRM, since few studies have taken into account prior financial performance. This point is strongly reinforced in a study by Shin and Konrad (2016) that used a longitudinal Canadian company-level dataset to explore the relation over time between HRM and productivity. After controlling for past performance and past HRM, they found a modest positive two-way causal link between the variables, with each having an influence on the other over three two-year time lags. The study by Piening, Baluch, and Salge (2013) found support for a cyclical process whereby HRM affected outcomes and these in turn affected HR practices. But Van de Voorde, Paauwe, and van Veldhoven (2010), in a cross-lagged study, found that an “HR-indexed” measure of organizational climate had an impact on organizational performance, though there was no evidence of performance influencing climate.

These studies help to highlight the challenges of establishing the causal direction in the HRM-outcomes relationship and challenge the size of the associations reported in cross-sectional studies. When the outcome is financial performance, one of the problems is that it tends to be very stable from year to year, leaving only a small amount of variance to explain. The same may be the case for HR practices. There are also major challenges in controlling for other endogenous and exogenous variables. What may be needed are naturally occurring quasi-experimental studies, possibly at branch levels. At a micro level, W/O psychologists have been more successful in demonstrating causality with respect, for example, to interventions for improving selection, training, or job design. Since the distinctive feature of HRM is that it needs to be considered as a system of practices and is more typically explored at the unit or organizational level, this presents distinctive challenges of access over time and interpretation of results when other factors are hard to control for. Understanding the dynamics of changes in the use of HR practices may require in-depth longitudinal, qualitative studies along with the dominant quantitative research.

Conclusion

HRM provides an important context for research in W/O psychology. It incorporates the core practices and activities that constitute W/O psychologists’ areas of expertise. HR departments often act as gatekeepers for W/O psychologists from outside the organization or as hosts for those working within it. HRM extends the traditional domain of W/O psychologists by incorporating strategic issues, and it raises ethical issues in terms of the “utilization” of employees that can sometimes spill over into “exploitation.” It is therefore important that research on outcomes addresses the impact of employee wellbeing while at the same time recognizing the pragmatic political requirement to explore those contexts, conditions, policies, and practices that offer the potential for both high performance and high wellbeing. HRM is a broad topic that has attracted an extensive and growing body of research. It also raises a lot of challenging research questions. Its multilevel, multidisciplinary characteristics pose additional challenges for W/O psychologists. But it is an important applied subject with room to link theory, research, and application, and it is one to which W/O psychology is making an increasingly significant contribution.

Further Reading

Bockerman, P., Bryson, A., & Ilmakunnas, P. (2012). Does high involvement management improve worker well-being? Journal of Economic Behavior and Organization, 84, 660–680.Find this resource:

Boxall, P., Purcell, J., & Wright, P. (Eds.). (2007). The Oxford handbook of human resource management. Oxford: Oxford University Press.Find this resource:

Brewster, C., & Mayrhofer, W. (Eds.). (2012). Handbook of research on comparative HRM. Cheltenham, U.K.: Edward Elgar.Find this resource:

Cascio, W., & Boudreau, J. (2012). A short introduction to strategic human resource management. New York: Cambridge University Press.Find this resource:

Legge, K. (2005). Human resource management: Rhetorics and realities. Basingstoke, U.K.: Palgrave Macmillan.Find this resource:

Paauwe, J., Guest, D., & Wright, P. (2013). HRM and performance: Achievements and challenges. Chichester, U.K.: Wiley.Find this resource:

Pfeffer, J. (1998). The human equation: Building profits by putting people first. Boston: Harvard Business School Press.Find this resource:

Rynes, S., Giluk, T., & Brown, G. (2007). The very separate worlds of academic and practitioner periodicals in human resources management: Implications for evidence-based management. Academy of Management Journal, 50(5), 987–1008.Find this resource:

Thompson, P. (2011). The trouble with HRM. Human Resource Management Journal, 21(4), 355–367.Find this resource:

Warner, M. (Ed.). (2011). Society and HRM in China. London: Routledge.Find this resource:

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