January 10th, 2018
Limitations to Assessing the Association between strategic human resource management and Performance
A limitation that impedes the assessment of the contribution of SHRM to organizational performance is the nature of traditional measures of performance. Measures of performance largely major on a firm’s financial performance thus use the principles outlined in financial accounting. In this respect, the SHRM performance measures can be identified by aspects such as labor productivity, which considers quantifiable aspects such as amount of output (products). Such performance measures may however not provide credible information with respect to entities that deal in intangible assets (Ismail, Omar & Bidmeshgipour 2010). For instance, marketing activities influence financial figures indirectly, for instance creating a greater brand awareness that leads to enhanced purchase intentions; measurement of performance in such an environment could thus require the use of non-financial metrics. HRM also provides intangible benefits that require use of non-financial metrics to quantify its performance.
One approach that helps in assessing the performance of the human resources is the balanced score card. The balanced score card examines an entity’s performance in respect to four perspectives – shareholder perspective, customer perspective, internal-processes perspective and ability to continue learning and growing (Bose 2004). The shareholder perspective embodies the financial measures (e.g. profitability) and assesses how various aspects contribute to the shareholder value. The customer perspective assesses how well the resources of a business enable it to meet customer expectations e.g. introducing a product or service that meets the needs of the customers. The internal-processes perspective assesses how the resources affect the effectiveness and efficiency of internal processes thus the ability of the organization to succeed. The forth perspective measures how the resources enhance the capacity of the organization to learn and continue growing. The input of SHRM to a business performance is highlighted better by considering such other performance measures apart from the financial measures.
Other measures that may elucidate the contribution of SHRM to an entity’s performance are those that are designed to assess innovation. The ability to innovate ensures that organization remains competitive even with increased competition (Cohen 2004). Metrics that seek to assess the level of innovation have changed over the years; initially, such measures were based either on the antecedents or outcomes of innovation. Based on antecedents, aspects such as increased investment on employee training, research and development and technological adoption were indicative of a potential for higher innovation (Ismail, Omar & Bidmeshgipour 2010). Based on outcomes, processes such as new product development or change of the functionality or quality of a product were indicative of the innovative capacity of an entity (Ismail, Omar & Bidmeshgipour 2010). Further metrics that assess innovation are based on surveys and scales that assess innovation capacity thus creating a basis for inter-firm comparison. However, a comparison between any firm’s capacity and those documented may become misleading where the environment of the firm under assessment differs from those of the firms that formed the base results (Ismail, Omar & Bidmeshgipour 2010). To avoid such ambiguity, current measures of innovation include factors such as management techniques and knowledge measures (e.g. organizational learning) to assess the innovative capacity of a firm. Accordingly, studies (e.g. Cohen 2004) suggest various leadership approaches that enhance innovation in an entity or a team. According to the broad view of business performance, the subsequent section evaluates how SHRM enhances the performance of a business by value addition. Go to part four here.