Unlocking the black box of the conceptual relationship between HRM system and organizational performance

Abstract

Despite the promising relationship that has been reported between HRM and Organization Performance (OP) in the last two decades, it is found that good HRM system and practices do not directly lead to better organization performance. However, questions remain about what factors mediate the HRM-OP relationship, which is commonly referred to as the “black box”. The aim of this paper, therefore, is to develop and propose a conceptual model that captures the mediating effects of organizational factors such as “AMO” (skills and Abilities, Motivation, and Opportunity to participate), employees’ attitudes, and employees’ behaviors on the relationship between the HRM system and organizational performance. The proposed model intends to integrate both the content and the process approach to HRM. The paper, as a part of a project, uses an operationalization method to develop a theory-based model. The model development process involves a large amount of review of the literature in the field of HRM and OP. Analysis of the key concepts is conducted. The potential association and relationship among the factors are identified through integration of the findings in the mainstream literature. In the second stage of the project, the proposed model will be empirically tested by quantitative method. A questionnaire survey will be carried out to collect primary data using random sampling method. Structural Equation Modelling (SEM) technique will be utilized for data analysis. Validity and reliability tests will be performed. Drawing on literature review, this paper supports the assertion that the impact of HRM on OP is indirect. Such impacts are achieved through its impacts on employees. Based on the operationalization, a conceptual framework is presented to represent the mediating effects of the factors on the relationship between the HRM system and organizational performance. The proposed framework argues that employees’ AMO, attitudes and behavior should be sequentially considered as the mediating factors in the HRM-OP relationship. Moreover, shared perceptions among employees (strong climate) towards the HRM system should have a significant moderating effect on the HRM-AMO relationship. It is expected that the findings from this paper and project can partially unlock the “black box” in the HRM-OP relationship. The proposed framework can help organizations realize that good HRM policy does not directly lead to expected OP. Policies and systems should be in place to monitor whether and how HRM system help achieve OP through its influences on employees.