(Solved): Strategic human capital management effectiveness as determinants of an organisational performance

STRATEGIC HUMAN CAPITAL MANAGEMENT EFFECTIVENESS AS DETERMINANTS OF ORGANISATIONAL PERFORMANCE We evaluated the impact of human resource (HR) managers’ capabilities on HR management effectiveness and the latter’s impact on corporate financial performance. For 293 U.S. firms, effectiveness was associated with capabilities and attributes of HR staff. We also found relationships between HR management effectiveness and productivity, cash flow, and market value. Findings were consistent across market and accounting measures of performance and with corrections for biases. There is broad agreement that a strategic approach to human resource management (HRM) involves designing and implementing a set of internally consistent policies and practices that ensure a firm’s human capital (employees’ collective knowledge, skills, and abilities) contributes to the achievement of its business objectives (Baird & Meshoulam, 1988; Jackson & Schuler, 1995; Schuler & Jackson, 1987). Fundamental to the strategic HRM perspective is an assumption that firm performance is influenced by the set of HRM practices firms have in place. Recent empirical evidence supports this basic assumption (Arthur, 1994; Cutcher-Gershenfeld, 1991; Huselid, 1995; Huselid & Becker, 1996; MacDuffie, 1995). Paradoxically, the preliminary empirical research, which established a relationship between HRM policies and practices and firm performance, made little distinction between policies and practices that reflect the more traditional, or technical, personnel perspective and those that reflect the adoption of the strategic human resource management perspective. Moreover, prior work has not considered the types of capabilities of human resources staffs associated with the effective implementation of these two types of HRM policies and practices. In this article, we attempt to improve upon the prior empirical literature on this topic by focusing on the impact of overall HRM quality on firm performance. We first develop the argument that HRM effectiveness, which We are grateful to IBM and Towers-Perrin for their support of this research. 171 172 Academy of Management Journal February includes the delivery of high-quality technical and strategic HRM activities, will be reflected in valued firm-level outcomes. We then assert that two types of HRM staff capabilities will have a significant impact on the effective management of firms’ human capital. To study the impact of HRM effectiveness and human resources staff capabilities on valued firm-level outcomes— employee productivity and corporate financial performance—we examined a large sample of firms drawn from a wide range of industries. Finally, we consider two important methodological issues that could bias our results: (1) the potential endogeneity of firm profitability and managerial assessments of HRM effectiveness and (2) survey response bias. THEORETICAL BACKGROUND AND HY

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