Human Resource Strategy to Improve Organisational Performance: a Route for British firms?

Introduction Performance, in the context of organisation, is not only a broad concept which has been used synonymously with productivity, efficiency, effectiveness, and more recently competitiveness, it has also been a subject of study for social scientists from a wide range of disciplinary perspectives. Labour productivity, for example, has long been the concern of (labour) economists ever since Marx and Smith. Within this perspective, how to extract labour from labour power, one of Marx's most fundamental insights, is seen as a basic problem of management (Harrison, 1997, p364). More recently efforts have been made by HRM theorists to try to establish a causal link between HRM and performance. This has led to a growing number of studies which examine the potential contribution that good human resource policy can make to improving organisational performance, so much so that 'the impact of human resource management on performance has become the dominant research issue in the field' (Guest, 1997, p263). The studies of HRM and performance are mostly cross-sectional and quantitative in nature, and contained in differing theoretical frameworks. While these studies provide us with colourful opposing findings and rich competing theoretical perspectives, the emerging field of HRM on performance suffers from a lack of unity in theory and inconsistency in research methodology. As Wood notes, 'The studies vary so markedly between each other that there is not even a pair of studies that differs simply on one or two dimensions'. Accordingly, 'A consistent picture does not emerge from the studies' (Wood, 1999b, p50). As Guest pointed out, 'statistical sophistication appears to have 3 been emphasized at the expense of theoretical rigour' and '(i)f we are to improve our understanding of the impact of HRM on performance, we need a theory about HRM, a theory about performance and a theory about how they are linked' (Guest, 1997, p263). Critiques (often backed by the more academically orientated research findings) have suggested that some HR policies (e.g. performance-related-pay) may be ideologically flawed, difficult to implement and with negative outcomes for various reasons. However, the drawback in relating 'HRM and performance' both in theory and in practice is by no means because the assumption of using HRM to improve organisational performance per se is flawed. Rather, the problem lies in the simplistic perception of the link, which is often discussed without contemplating the organisational context. Assuming HR policies have a positive effect on performance (arguably a …