The relationship between HRM and business performance Literature review

The relationship between HRM and business performance - Literature review Example First, the review suggests that human resource practices have synergistic and performance enhancing influences when used in conjunction with empowerment-enhancing practices that boost employee responsibility and autonomy. Secondly, study attempts to explore the link between HRM and firm performance by studying frameworks that link HRM to financial performance despite the various studies that claim there is no link between HRM and Firm performance. The literature offers overview on research regarding HRM and Businesses performance and subsequently shows the relation between HRM and performance in organizations. Business strategy and the integration of HRM practices form an essential factor in organizational effectiveness because the use of business strategy as a contingent factor moderates the relation between human resources practices as el as firm performance. Therefore, business strategies paired together with proper HRM activities have positive influences on the firm’s perf ormance. According to Ahmad and Schroeder(2003) and their counterparts Youndt and Snell(2004), the impact of HRM to organizational outcomes became an essential topic in early 1990s because it attaches significance to motivational aspects of organizational practices in developing and utilizing human capital. HRM involves development of people’s abilities and attitudes in way that the individual can develop personally and contribute toward the organization’s goals. According to Youndt and Snell(2004), other studies consider HRM practices to be pay and reward, recruitment and selection, training and development, health and safety as well as work expansion or reduction. However, various studies suggest that six essential HRM practices that are likely to positively influence a firm’s performance include training and development, teamwork, incentives, HR planning, performance appraisal as well as employment security (Sels, Winne, Delmotte, Maes, Faems and Forrier, 200 6; Seibert,Silver and Randolph, 2004). According to Sels et al (2006), training and development involves the amount of formal training offered to employees, although organizations can offer extensive training, organizations also rely on acquired skills through selection and socialization. Training in businesses influence performance in two key ways the first one being, that training improves on the relevant skills, capabilities, and secondly training compliments employees’ satisfaction in their prevailing job and workplace. Teamwork in businesses contributes to business performance because it results in effective achievement, facilitates flow of ideas resulting in innovative solution and helps in saving administrative costs associated with paying specialists in order to watch people (Sels et al 2006). Incentives in businesses rely on performance and remain one of the usual means for organizations to enhance employee motivation through provision of performance-contingent incen tive in order to align employee and shareholder interests. According to Chiang(2004), although compensation is categorised into financial and non-financial incentives, some incentives like pay incentives in form of bonuses and profit sharing or even indirect compensation like health insurance and vacation all influence the performance of firms. According to Gill and Meyer(2008), HR planning in enterprises involves forecasting