HRM’s financial value from obtaining more star performers

Abstract

We assessed the financial value of human resource management (HRM) as a function of obtaining more star performers. Specifically, we implemented utility analysis procedures on 206 samples of individual performance (i.e. output) encompassing 824,924 workers. We found that HRM adds greater financial value by obtaining more stars. Our results also offer several specific contributions to HRM theory. First, regarding how HRM produces greater value by obtaining more stars, our evidence points to a nonlinear model of HRM’s value, where HRM generates significant yet diminishing returns by increasingly obtaining the most productive ones. Second, regarding when, our results show that diminishing returns from HRM are stronger when output differences among top stars are relatively small. Third, regarding why, our study explains that small output differences among top stars may create various costs which diminish the returns from obtaining the most productive stars. Our explanation of HRM’s nonlinear pattern contributes to the star literature by helping integrate a variety of specific explanations for stars’ curvilinear influence discussed in past research. Regarding HRM practices, we highlight the need to use utility analysis procedures that more fully consider the existence of stars. Supplemental data for this article is available online at https://doi.org/10.1080/09585192.2021.1948890 .