The models exploring the "black box" between HRM and organizational performance

Abstract

Rapid environmental change, globalization, competition to provide innovative services and products have become the standard frame for organizations. In order to compete effectively, firms have to improve their performance (Chang, Huang, 2005). Because performance stands out as one major organizational goal, many of human resource management (HRM) research efforts have been directed to understand the HRM-Performance linkage (Gardner, Moynihan, Park, Wright, 2001). Much of empirical research on the added value of HRM demonstrate evidence that HRM does matter (Arthur, 1994; Huselid, 1995;), however contrary approach also exists: evidence for HRM-Performance link should be treated with caution (Wall, Wood, 2005). By supporting the HRM-Performance link it is not clear why this link exists. In order to provide a convincing explanation of HRM-Performance link, according Guest (1997), it is necessary to improve theoretical and analytical frameworks in three key areas: the nature of HRM, the nature of performance and the linkage between HRM and performance. The paper provides an insight into HRM drawing a conclusion that there is no single agreed or fixed list of human resource (HR) practices which are used to define human resource management. To better disclose performance, the paper looks into four levels of performance outcomes which makes HRM Performance link more evident. Assuming that there is a little understanding of the mechanisms through which HRM influence performance, the paper defines the "black box" problem. The paper provides an overview of a number of conceptual models (Becker, Huselid, Pickus, Sprat,1997; Guest, 1997; Purcel, Kinnie, Hutchinson, Rayton, Swart 2003; Wright, Nishii, 2006) that attempt to depict the processes through which HR practices ultimately impact organization financial performance. Assuming that the similarity among all of these models is that they all have their basis in a linear causal process, the paper looks into two additional aspects: first, the number of boxes in the "black box"; second, the content of each box. Finally the comparison and summing-up of four models is presented in this paper. This brings to conclusion that the identification of the specific mechanisms that mediate between HRM practices and organizational performance should be considered as a central issue in HRM literature.