Human resource management practices and organizational effectiveness: internal fit matters

Abstract

Purpose– The purpose of this paper is to test alternative conceptualizations of the relationship between systems of human resource management (HRM) practices and organizational effectiveness. The authors describe a framework suggesting a complex relationship between HRM practices and organizational effectiveness, test this approach empirically in a large sample of US motor carriers, and compare the results to those derived using other approaches prevalent in the strategic HRM literature.Design/methodology/approach– The study used a large scale cross-sectional survey design. In a sample of US motor carriers, questionnaires completed by senior HRM department staff were used as the primary data. The data were supplemented by organizational effectiveness data reported by motor carriers to the US Government.Findings– The results support the general hypothesis that HRM practices enhance organizational effectiveness, provide some evidence that HRM practices can enhance each other’s effectiveness, and underscore the value of theory driven methodological approaches. Specifically, the authors found that HRM system comprising practices that ensure selectivity in staffing, performance-based pay, and enhanced employee opportunity through participation in decision-making result in higher levels of organizational effectiveness. Additionally, the effects of other combinations of these practices varied.Practical implications– This study highlights the need for HRM departments and organizations to approach the strategic management of employees with a systems perspective. The optimal design of an HRM strategy must take into account the various components.Originality/value– This study is one of the first to test the main assumptions of the systems perspective in strategic HRM using multiple measures and empirical approaches for combining HRM practices into systems. Comparison of these different approaches in a single study offers insight into how researchers can test the relationship between HRM practices and organizational effectiveness and provide practitioners more useful approaches for designing HRM systems.