Investing in HR? Human resource function investments and labor productivity in US organizations

Abstract

This study provides an empirical examination of the relationship between organizational investments directed toward the human resource (HR) function and a key performance outcome – labor productivity. Utilizing a multiple constituency perspective of the HR function, we proposed that organizational investments of financial resources into their HR functions will influence labor productivity; and that the availability of professional HR staff and implementation of high performance work systems will moderate this relationship. Utilizing a sample of 475 organizations drawn from multiple locations and sectors in the United States, we found that HR function investments predicted labor productivity, and the proportion of HR staff occupying professional/technical roles moderated (enhanced) the HR function investment-labor productivity relationship. However, the HR function investment-productivity relationship was found to be stronger in organizations with low (as opposed to high) levels of high performance work systems. We discuss these findings within the context of increasing demand on the HR function to demonstrate returns on investments.