The financial impact of HRM


We are discussing here some key findings of leading researchers showing Current trends. These results were summarized which describe a pattern of relationship among several intangible assets. They are influenced by the HR architecture and focused strategically for measurement of systems.

The results of this study can be summarized as follows:

* Strategy implementation is more important than strategy content. A 35% improvement in the quality of strategy implementation, for the average firm, was associated with a 30% improvement in shareholder value. A similar improvement in the suitability of the strategy itself had no effect on firm performance.

* Strategy implementation has three drivers: employee strategic focus, HR strategic alignment, and effective knowledge management. HR strategic alignment and the knowledge management system also drive employee strategic focus.

A balanced performance management system affects firm performance through its impact on employee strategic focus, which in turn drives effective strategy implementation.

In addition to the effects that drive the strategy implementation process, Becker and Huselid have focused specifically on the relationship between the High-Performance Work System described for share holders. Our results indicate that for the average firm, a 35% improvement in our high-performance HR index is associated with just over a 20% increase in shareholder value. These findings are part of a larger research literature demonstrating HR’s impact on firm performance.

We analyzed employee strategic focus as a response to three underlying management systems, looking specifically at the following relationships:

* The extent to which a firm has aligned its HR system with the demands of the strategy implementation process;
* The presence of a comprehensive knowledge management system that both generates and effectively distributes knowledge throughout the firm; and
* The presence of a business performance measurement system that reflects both the leading and lagging indicators of successful strategy implementation.

Our data show that each if the three systems would have to be improved by 50% to realize the gains from employee strategic focus described earlier. In short, there are ample economic rewards associated with superior human capital management, but there are no quick fixes. Developing such an approach requires a systematic method and commitment to the long-run development of people.