Human resource management, commonly abbreviated as HRM, has emerged as an increasingly important field in contemporary business organizations. Companies today recognize the HRM function as being highly integral to their success, since HRM has evolved from simply being a function that is responsible for hiring and firing employees, to a function that manages people and knowledge within an organization. This means that no company in today’s competitive market is able to succeed without looking at HRM as a core component of their business structure. This report analyzes the theories of HRM, delving into the core responsibilities and functions of the HRM department within ...view middle of the document...
Narrower theories of HRM define this function as the “decision-maker of employment” (Marchington and Wilkinson, 2008; Boxall and Purcell, 2008). Others define HRM as a distinct approach that makes use of an array of techniques in order to obtain a competitive advantage through employing highly skilled and committed workforce (Storey, 1995). Koch and McGrath (1996) state that HRM has the ability to facilitate companies in improving organizational behaviors like competency, staff commitment, and flexibility, all of which lead to the improvement in employees’ performance.
HRM is also defined as being with two completely opposite words: “generic” and “distinctive” (Torrington, Hall and Taylor, 2008). In being generic, HRM pertains to all personnel management activities including staffing, administration, change, and performance management. In being distinctive, HRM is able to enhance the business objectives of an organization through the introduction of strategic and flexible structures for managing relationships within organizations and maximizing the productivity of the workforce. In contrast, HRM is also defined as being solely about the management of employees for achieving competitive advantage (Legge, 1995; Keenoy, 1990). The shift of terminology from “personnel management” to “human resource management” is also of great importance here since it is regarded as showing the move of organizations from management of jobs into the management of people within organizations (Lepak and Snell, 2007).
Relationship between HRM and Organizational Performance
The relationship between HRM and performance has gained much popularity in recent years. Delery and Shaw (2001) explain that for an organization, HRM practices have the most direct influence on human capital, and human capital can be a source of competitive advantage for the organization. They also state that “the complex nature of HRM systems of practice can enhance the inimitability of the system”. The resource-based view is the most dominant theory explaining the link between HRM and organizational performance, since it focuses on the ability of an organization to gain sustainable competitive advantage through the effective and efficient utilization of its resources, including human capital.
According to the resource-based view as applied to the field of HRM by Wright, McMahan and McWilliams (1994), human capital – people within an organization – are embedded with the properties of value, rareness, inimitability, and non-substitution. These properties are explained to be a necessary prerequisite for organizational success (Barney, 1991). The linkage between HRM and enhanced organizational performance has been extensively researched. Becker, Huselid, Pickus and Spratt (1997) provide one such contextual framework, which starts with business and strategic initiatives in place at an organization and builds in HRM systems to finally end at market value. According to such a framework, the HRM...