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Reading 1:

The Impact of Human Resource Management Practices on Turnover, Productivity,


and Corporate Financial Performance
MARK A. HUSELID

Reference: Huselid (1995)


Key Takeaway: High Performance Work Practices can have a significant positive impact on both intermediate
employee outcomes, such as reduced turnover and increased productivity, and short- and long-term measures of
corporate financial performance.

High Performance Work Practices


DEFINITION
High performance work practices refer to a series of human resource management (HRM) polices and practices
including:
! Comprehensive employee recruitment and selection procedures
! Intensive compensation and performance management systems
! Extensive employee involvement and training

THEORY
High performance work practices can:
! Improve employee skills, knowledge, and abilities
o! Through providing training experiences, such as basic skills training, on-the-job experience, coaching,
mentoring, and management development.
o! Through improving the quality of employees. Recruiting procedures that provide a large pool of
qualified applications will have a substantial influence over the quality and type of skills new
employees possess.
! Increase employee motivation
o! By encouraging them to work both harder and smarter.
o! Through the use of performance appraisals, incentive compensation systems, internal promotion
systems that focus on employee merit.
! Reduce turnover
o! By enhancing job satisfaction and perceptions of job security.
! Enhance retention of quality employees while encouraging nonperformers to leave the firm
! Enhance firm performance
o! Through provision of organisational structures that encourage participation among employees and
allow them to improve how their jobs are performed.

Results from this Study


CONCLUSION
Systems of high performance work practices will diminish employee turnover and increase productivity,
which, in turn, improve corporate financial performance.

CONTINGENCIES
! Synergies between HRM practices Firms that adopt HRM practices that complement and support
each other will reap greater benefits (e.g. Firms valuing employee commitment are less likely to use
temporary employees, and more likely to invest in skills training and incentive compensation, which is likely
to attract high-performing employees.)
! Alignment with competitive strategy Although theoretical, it is a rather compelling argument that
firm performance will be enhanced by alignment of HRM practices with its competitive strategy.

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