Review Report

Abstract

This study comprehensively evaluated the links between systems of High Performance Work
Practices and firm performance. Results based on a national sample of nearly one thousand firms
indicate that these practices have an economically and statistically significant impact on both
intermediate employee outcomes (turnover and productivity) and short- and long-term measures
of corporate financial performance.

Introduction

This is a review of the study “The Impact of Human Resource Management Practices on
Turnover, Productivity, and Corporate Financial Performance”. The study focuses on how
human resource management (HRM) policies and practices affects the firm performance as an
important topic.

The study is supported by related literature to examine that a firm's current and potential human
resources are important concern in the development and execution of its strategic business plan
and human resource management practice can help to produce a basis of continual competitive
advantage.

Researchers proposed that a certain bundle of HR practices could be a potential source of

competitive advantage and have a significant impact on organizational performance. For
example, HPWS was found to favorably affect turnover, labor productivity, firm
productivity and firm financial performance. This study is very significant and advances from the
earlier human resources literature because it focused on the overall HRM systems rather than
individual HRM practices.

Theoretical literature clearly suggests that the behavior of employees within firms has important
implications for organizational performance and that human resource management practices can
affect individual employee performance. Thus, the empirical literature on this study concentrates
on prior work examining the influence of HRM Practice on employees’ turnover, productivity,
and corporate financial performance.

Method
The sample was drawn from compact disclosure, a database containing comprehensive financial
information, Firms were included in the sample if they had more than a hundred employees and
excluded if they were foreign-owned, holding companies, or publicly held divisions or business
units of larger firms. These criteria yielded 3,452 firms representing all major industries.

Questionnaire were mailed to senior HR professionals to collect firm-level data on High

Performance Work Practice. Using survey materials, pilot study were conducted. Questions
concerning each High Performance Work Practice were asked separately for exempt and
nonexempt employees, and respondents indicated the proportion of employees in each category
who were affected by each practice.

Summary

The study supports some prior research in this area. A developing body of research has reported
positive associations between firm-level measures of HRM systems and organizational
performance.

Many studies have reported a statistically significant relationship between HR practices and

organizational performance. Whereas, one of the most important developments in this study is
the growth in studies of HPWS by linking HR practices and performance of a firm.

Result and Conclusion

The results are clearly presented and specifically addresses each research questions. Appropriate
narrative are described in text. Overall, the result suggests that employee skills and
organizational structures scale was negatively related to turnover, while both scale were
positively related to productivity and corporate financial performance.

Reference list

Arthur, J. B. 1994. Effects of human resource systems on manufacturing performance and

turnover. Academy of Management Journal, 37: 670-687.

Barney, J. 1991. Firm resources and sustained competitive advantage. Journal of Management,
17: 99-120.

Becker, B. E., & Olson, C. A. 1987. Labor relations and firm performance. In M. M. Kleiner, R.
N. Block, M. Roomkin, & S. W. Salsburg (Eds.), Human resources and the performance of
the firm: 43-85. Washington, DC: BNA Press.