SHRM Knowledge clip 1: Black box debate
Strategic Human Resource Management
Central to Strategic Human Resource Management is the idea that the adoption by organizations of a more
‘sophisticated’ (= verfijnd) set of HR practices covering key aspects of the management of people in the
workplace has a positive impact on organizational performance.
HR practices --> key aspects of management of people --> organizational performance
The practices and policies involved cover a wide range of human resource functions in areas such as:
- recruitment and selection
- training and development
- performance management
- pay and benefits
- participation
- communication
According to SHRM theory, the more these HR practices are implemented in an organization, the better the
organization’s performance.
However, our understanding of the processes by which HR practices affect organizational performance has
been quite limited.
Indeed, it is unclear both how many steps there are in the link between HRM and performance, and what the
content of each step is.
Þ This has been referred to as the black box debate in Strategic Human Resource Management.
In response, there have been a number of efforts to model the impact of HRM on organizational performance.
Central to these models is the idea that employees play a key role in explaining the impact of HR practices on
organizational performance.
Let us take a closer look at the question by discussing three theories that dominate the field of Strategic
Human Resource Management.
The first is the Resource-Based View of the Firm (RBV, developed by Barney in 1991). The main assumption of
this theory is that organizations can build:
- a competitive advantage based on resources that are valuable (capable of delivering superior
competitive results)
- rare (not easily obtained by competitors)
- imperfectly imitable (hard to copy)
- and non-substitutable (hard to replace).
Organizations have different types of resources, including:
1) Organizational resources (e.g., structure, planning)
2) Physical resources (e.g., plants, equipment)
3) Human resources.
Building upon this resource-based paradigm, Boxall proposes that a human resource advantage can consist
of the following:
1) The first model
Human capital advantage – a situation where there is a stock of exceptional human talent working within the
organization, whose knowledge, abilities and skills match the strategic needs of the firm.
SHRM theme 1 1
,Human process advantage – the presence of difficult-to-imitate, historically evolved processes within the
organization, such as intense forms of co-operation between people.
As such, the RBV logic provides a rationale for how HR practices positively affect organizational performance
by building a better human capital pool and by stimulating better processes within the organization.
2) The second model is the AMO framework by Appelbaum and colleagues. This refers to the idea that people
perform well if they have the Ability, Motivation, and Opportunity to do so. Let’s take a look at the three
components.
• Ability means the employee can perform well on the job because he/she possess the necessary
knowledge and skills (this is linked to human capital theory).
These, in turn, can be influenced by HR practices, for example by providing training opportunities.
• Motivation means employees perform well on the job because they want to perform well.
HR practices such as internal career opportunities and extensive rewards motive employees to
perform well (this is linked to social exchange theory).
• Opportunity to perform well. HR practices such as enabling employee participation in decision-
making can empower employees to show good performance.
In sum, the AMO provides a rationale for how HR practices impact organizational performance by increasing
employees’ ability, motivation, and opportunity to produce high performance.
3) The third model
Finally, we have the HRM process model by Wright and Nishii. This model highlights:
- the distinction between HR practices that senior managers intend to implement in the organization
- the practices that are actually implemented by line managers
- and employees’ perceptions of these implemented practices.
The model also explains why there is sometimes a disconnect between the three.
For example, line managers may fail to implement an intended HR practice because they a) lack the time or
skills to do so.
Employees, for their part, may interpret the same practices in different ways because of factors like their b)
previous work experience.
This model thus addresses the question of how HR practices impact organizational performance by looking at
how these practices are implemented in the workplace, and how employees experience and respond to
them.
Conclusion
We have discussed how HRM is related to organizational performance, and explored the underlying
processes according to the Resource Based View, the AMO framework and the HRM process model.
Based on these theories, we can conclude that employees (or human resources) play a key role in explaining
the impact of HR practices on organizational performance.
SHRM theme 1 2
, Online lecture 1: Black box debate
Strategic Human Resource Management
"InvesRng in training and development of employees is not necessary, according to management within my
organizaRon" says 22% of the HR professionals at Dutch companies. This is evident from research by the
entrepreneur among more than 500 HR professionals.
The black box debate.
The main aim of this lecture is to share with you the knowledge and insights that are discussed in two
theoreRcal papers as part of this theme.
These papers are wri_en by 1) Peccei & van de Voorde and 2) Chadwick & Flinchbaugch.
I will discuss the main elements presented in these papers and will use some addiaonal sources and examples
to help you understand the material.
In the news
Recently, an aracle in the news had the following headline “Almost a quarter of managers finds invesRng in
staff unnecessary”.
This is what recent research has shown.
For example, managers argue that invesang in training and development of employees is not necessary,
because they might leave the organizaRon or they are not moRvated to develop themselves.
This raises the quesaon given that investments in personnel costs ame, effort, money of managers and
workers.
What are actually the benefits of invesang in people? Why should or should you not invest in your workforce?
StarRng point of this course: HRM – organizaRon performance link
SHRM theme 1 3
, Let's start with the starang points of the strategic HRM course, which is the relaaonship between HRM and
organizaaonal performance.
In general it has been argued that key aspects of HRM have a posiave impact on the success of the
organizaaon.
This relaaonship between HRM and organisaaonal performance has been examined in a large number of
empirical studies and one way to summarise these findings is to do a meta-analysis.
A meta-analysis is a technique to combine the findings from different independent studies that are done on a
certain topic.
And in the meta-analysis by Combs and colleagues from 2006 for which the results are presented here on this
slide, 92 empirical studies on this relaaonship were included.
The study makes a disancaon between organizaaonal performance in terms of operaaonal outcomes, such as
producavity and quality, and on the other hand, financial outcomes, such as profit and market share.
HR pracRces in more detail
The first domain relates to recruitment and selecaon and training and development, which focuses on staffing.
Staffing is the process of gaining and retaining a workforce of sufficient quanaty and quality.
It focuses on employee development in terms of their knowledge, skills, aktudes and on gekng the required
competencies in place. For example, by making use of extensive selecaon procedures to get the best candidate
for the job.
The second domain is more instrumental in nature as this focuses on how to moRvate employees.
It covers performance management policies, compensaaon policies and incenave and reward policies.
Performance management is an integrated process in which managers work with their employees to set
expectaaons and to measure and review their results, and also to reward their performance, to ulamately
improve the performance of the organizaaon.
The Final Domain focuses on providing employees the opportunity to use their knowledge, skills and abiliaes
to invest their efforts in their work.
This includes pracaces such as paracipaaon opportuniaes like involvement in decision making and
communicaaon, such as providing informaaon on how well the company is doing in achieving its goals.
The specific findings of this study.
We see that HRM relates posiRvely to operaRonal and financial outcomes, although the size of the effect
differs across the two types of outcomes.
But we can conclude that there is a moderately strong posiave relaaonship between HRM and performance for
both operaaonal and financial outcomes.
SHRM theme 1 4
Strategic Human Resource Management
Central to Strategic Human Resource Management is the idea that the adoption by organizations of a more
‘sophisticated’ (= verfijnd) set of HR practices covering key aspects of the management of people in the
workplace has a positive impact on organizational performance.
HR practices --> key aspects of management of people --> organizational performance
The practices and policies involved cover a wide range of human resource functions in areas such as:
- recruitment and selection
- training and development
- performance management
- pay and benefits
- participation
- communication
According to SHRM theory, the more these HR practices are implemented in an organization, the better the
organization’s performance.
However, our understanding of the processes by which HR practices affect organizational performance has
been quite limited.
Indeed, it is unclear both how many steps there are in the link between HRM and performance, and what the
content of each step is.
Þ This has been referred to as the black box debate in Strategic Human Resource Management.
In response, there have been a number of efforts to model the impact of HRM on organizational performance.
Central to these models is the idea that employees play a key role in explaining the impact of HR practices on
organizational performance.
Let us take a closer look at the question by discussing three theories that dominate the field of Strategic
Human Resource Management.
The first is the Resource-Based View of the Firm (RBV, developed by Barney in 1991). The main assumption of
this theory is that organizations can build:
- a competitive advantage based on resources that are valuable (capable of delivering superior
competitive results)
- rare (not easily obtained by competitors)
- imperfectly imitable (hard to copy)
- and non-substitutable (hard to replace).
Organizations have different types of resources, including:
1) Organizational resources (e.g., structure, planning)
2) Physical resources (e.g., plants, equipment)
3) Human resources.
Building upon this resource-based paradigm, Boxall proposes that a human resource advantage can consist
of the following:
1) The first model
Human capital advantage – a situation where there is a stock of exceptional human talent working within the
organization, whose knowledge, abilities and skills match the strategic needs of the firm.
SHRM theme 1 1
,Human process advantage – the presence of difficult-to-imitate, historically evolved processes within the
organization, such as intense forms of co-operation between people.
As such, the RBV logic provides a rationale for how HR practices positively affect organizational performance
by building a better human capital pool and by stimulating better processes within the organization.
2) The second model is the AMO framework by Appelbaum and colleagues. This refers to the idea that people
perform well if they have the Ability, Motivation, and Opportunity to do so. Let’s take a look at the three
components.
• Ability means the employee can perform well on the job because he/she possess the necessary
knowledge and skills (this is linked to human capital theory).
These, in turn, can be influenced by HR practices, for example by providing training opportunities.
• Motivation means employees perform well on the job because they want to perform well.
HR practices such as internal career opportunities and extensive rewards motive employees to
perform well (this is linked to social exchange theory).
• Opportunity to perform well. HR practices such as enabling employee participation in decision-
making can empower employees to show good performance.
In sum, the AMO provides a rationale for how HR practices impact organizational performance by increasing
employees’ ability, motivation, and opportunity to produce high performance.
3) The third model
Finally, we have the HRM process model by Wright and Nishii. This model highlights:
- the distinction between HR practices that senior managers intend to implement in the organization
- the practices that are actually implemented by line managers
- and employees’ perceptions of these implemented practices.
The model also explains why there is sometimes a disconnect between the three.
For example, line managers may fail to implement an intended HR practice because they a) lack the time or
skills to do so.
Employees, for their part, may interpret the same practices in different ways because of factors like their b)
previous work experience.
This model thus addresses the question of how HR practices impact organizational performance by looking at
how these practices are implemented in the workplace, and how employees experience and respond to
them.
Conclusion
We have discussed how HRM is related to organizational performance, and explored the underlying
processes according to the Resource Based View, the AMO framework and the HRM process model.
Based on these theories, we can conclude that employees (or human resources) play a key role in explaining
the impact of HR practices on organizational performance.
SHRM theme 1 2
, Online lecture 1: Black box debate
Strategic Human Resource Management
"InvesRng in training and development of employees is not necessary, according to management within my
organizaRon" says 22% of the HR professionals at Dutch companies. This is evident from research by the
entrepreneur among more than 500 HR professionals.
The black box debate.
The main aim of this lecture is to share with you the knowledge and insights that are discussed in two
theoreRcal papers as part of this theme.
These papers are wri_en by 1) Peccei & van de Voorde and 2) Chadwick & Flinchbaugch.
I will discuss the main elements presented in these papers and will use some addiaonal sources and examples
to help you understand the material.
In the news
Recently, an aracle in the news had the following headline “Almost a quarter of managers finds invesRng in
staff unnecessary”.
This is what recent research has shown.
For example, managers argue that invesang in training and development of employees is not necessary,
because they might leave the organizaRon or they are not moRvated to develop themselves.
This raises the quesaon given that investments in personnel costs ame, effort, money of managers and
workers.
What are actually the benefits of invesang in people? Why should or should you not invest in your workforce?
StarRng point of this course: HRM – organizaRon performance link
SHRM theme 1 3
, Let's start with the starang points of the strategic HRM course, which is the relaaonship between HRM and
organizaaonal performance.
In general it has been argued that key aspects of HRM have a posiave impact on the success of the
organizaaon.
This relaaonship between HRM and organisaaonal performance has been examined in a large number of
empirical studies and one way to summarise these findings is to do a meta-analysis.
A meta-analysis is a technique to combine the findings from different independent studies that are done on a
certain topic.
And in the meta-analysis by Combs and colleagues from 2006 for which the results are presented here on this
slide, 92 empirical studies on this relaaonship were included.
The study makes a disancaon between organizaaonal performance in terms of operaaonal outcomes, such as
producavity and quality, and on the other hand, financial outcomes, such as profit and market share.
HR pracRces in more detail
The first domain relates to recruitment and selecaon and training and development, which focuses on staffing.
Staffing is the process of gaining and retaining a workforce of sufficient quanaty and quality.
It focuses on employee development in terms of their knowledge, skills, aktudes and on gekng the required
competencies in place. For example, by making use of extensive selecaon procedures to get the best candidate
for the job.
The second domain is more instrumental in nature as this focuses on how to moRvate employees.
It covers performance management policies, compensaaon policies and incenave and reward policies.
Performance management is an integrated process in which managers work with their employees to set
expectaaons and to measure and review their results, and also to reward their performance, to ulamately
improve the performance of the organizaaon.
The Final Domain focuses on providing employees the opportunity to use their knowledge, skills and abiliaes
to invest their efforts in their work.
This includes pracaces such as paracipaaon opportuniaes like involvement in decision making and
communicaaon, such as providing informaaon on how well the company is doing in achieving its goals.
The specific findings of this study.
We see that HRM relates posiRvely to operaRonal and financial outcomes, although the size of the effect
differs across the two types of outcomes.
But we can conclude that there is a moderately strong posiave relaaonship between HRM and performance for
both operaaonal and financial outcomes.
SHRM theme 1 4
