The impact of HR practices on the performance of business units

The impact of HR practices on the performance of business units

Importance-of-HRP-by-5-Elements-RPOPatrick M. Wright, Cornell University
Timothy M. Gardner, Brigham Young University
Lisa M. Moynihan, London Business School
Human Resource Management Journal, Vol 13 No 3, 2003,pages 21-36

Firms have increasingly recognised the potential for their people to be a source of competitive advantage(Pfeffer, 1994).Creating competitive advantage through people requires careful attention to the practices that best leverage these assets.This change in the mindset of executive decision-makers has spurred an increasing body of academic research attempting to reveal a relationship between a firm’s HR practices and its performance.practices and its performance.Much of this research has demonstrated statistically significant relationships between measures of HR practices and firm profitability(Delery and Doty,1996; Guthrie,2001; Huselid, 1995).While these studies have been useful for demonstrating the potential value created through HR practices,they have revealed very little regarding the processes through which this value is created (Wright and Gardner,2002).Some authors have referred to this as the `black box’ problem,noting that the conceptual development of the mediating mechanisms through which HRM has an impact on profitability has thus far eluded empirical testing(eg Purcell et al, 2003).
In addition,the vast majority of studies examining the relationship between HR practices and firm performance have been entirely cross-sectional in their design.Again,while providing useful information,such designs are somewhat
problematic.In essence,cross-sectional designs preclude making any causal inferences regarding the direction of the relationship.So,while we may believe the HR practices are driving firm performance, we cannot rule out that the reverse is actually the case.


The impact of HR practices on the performance of business units

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