On the road to HR legitimacy in SMEs: the signalling power of HR metrics

Abstract

In this study, we examine why and how HR metrics can help increase the legitimacy of the HR function in organizations. Drawing on signalling theory, we conceptualize HR metrics as a communicational tool that signals the value of the HR function’s activities and contributions. We apprehend HR legitimacy through two key concepts: the strength of the HRM system and the underlying philosophies, or raison d’être, attributed to the HR function, namely maximizing business performance and promoting employee well-being. Testing our model among a sample of 218 HR professionals in Canadian small and medium-sized enterprises (SMEs), we find that the relationships between HR metrics and HR philosophies are partially mediated by HRM strength. These results suggest that HR professionals can tap into the signalling power of HR metrics to enhance the legitimacy of the HR function by fostering shared perceptions that HR goals, activities, and contributions are valuable and aligned with the interests of both management and employees. This suggests that the use of HR metrics and analytics can help HR functions pursue a pluralist philosophy that seeks to enhance mutuality in employment relationships. This research is among the first to use a quantitative design to capture HR legitimacy.