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We describe why human resource management (HRM) decisions are likely to have an important and unique influence on organizational performance. Our hope is that this research forum will help advance research on the link between HRM and organizational performance. We identify key unresolved questions in need of future study and make several suggestions intended to help researchers studying these questions build a more cumulative body of knowledge that will have key implications for both theory and practice.
A rapidly changing economic environment, characterized by such phenomena as the globalization and deregulation of markets, changing customer and investor demands, and ever-increasing product-market competition, has become the norm for most organizations. To compete, they must continually improve their performance by reducing costs, innovating products and processes, and improving quality, productivity, and speed to market. With this Special Research Forum on Human Resource Management and Organizational Performance, we hope to contribute to a better understanding of the role of human resource decisions in creating and sustaining organizational performance and competitive advantage.
The conceptual and empirical work relevant to this question has progressed far enough to suggest that the role of human resources can be crucial (Arthur, 1994; Cutcher-Gershenfeld, 1991; Huselid, 1995; Huselid & Becker, 1996; Gerhart & Milkovich, 1990; Ichniowski, Shaw, & Prennushi, 1994; MacDuffie,1995). However, given the importance and complexities of the issue, this body of work is relatively small, and most of the key questions are sorely in need of further attention. We hope that the publication of this special forum will encourage and reinforce interest in this area, as well as help researchers in their decisions regarding what to study and how to study it. We also hope that it will demonstrate to senior human resources (HR) and line managers that their HR systems represent a largely untapped opportunity to improve firm performance.
How do human resource decisions influence organizational performance? In the simplest terms, they must either improve efficiency or contribute to revenue growth. Human resources, both as labor and as a business function, has traditionally been viewed as a cost to be minimized and a potential source of efficiency gains. Very seldom have HR decisions been considered a source of value creation, or what Hamel and Prahalad (1994) termed "numerator management." Labor...