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Human Resources - Do HR Management Practices Contribute to Increased Firm Performance?

Updated on July 11, 2012

The title of this article is a broad question. Whether or not human resource management plays a role in increasing performance is a debatable topic. There are numerous arguments that can be made for both sides. Still, I think there may be a stronger case for those who believe in the foundation of human resources and the part it plays in any organization.


There are those who say no. Human resources has proven ineffective and utterly a waste of company money. After all, there is no direct correlation to human resource managers and profits. They do not sell. They do not produce. They do not do anything that will generate a company more money than if they did not exists in the workplace at all. This is a bold argument to side with. Yet I think it is justifiable. Many companies before the introduction of HR were extremely profitable and employee turnover was not high. This may be due to number of factors, but regardless, it cannot be ignored. There is also the fact that even nowadays companies often rid themselves of HR people simply because they cannot find any use for them other than recruitment, firings, and outsourcing relations. Also, wouldn’t the actual frontline employees probably be happier if the salaries of those in HR could be added into their paychecks? Would they notice a difference in the daily operations of their jobs? Does the benefit of higher pay for them not outweigh the benefits of having a human resources manager? It is tough to say no to these questions. Many would argue the point by saying that other managers could do the job of what HR currently does in their spare time and not have to add a penny to the payroll. Lower costs means, or should mean, higher wages for other employees in the long run. Therefore, it may seem fit to get rid of HR because of the fact it is not a profit generating entity. It is costly and ultimately not a viable resource to a company. So they say.


Others are incredibly satisfied with the role HR plays in the workplace. They realize that good employees begin with a human resource manager’s ability to foresee the potential and personalities of the people they interview and eventually hire. They also realize that without HR, training becomes less and less important. Training is a huge factor in ensuring that all workers at all levels in a company are confident in who they are and what they do at work. Confidence slowly but surely will turn an otherwise unhappy employee into one who is satisfied in what he or she does. That person may be aware or unaware of this. Still, as gradually as the tide lifts a stranded ship, that person will become a satisfied, happy employee. The argument can be made that while HR is not a visible profit generating branch of a company, they are the muscle behind the profit generating people. They are behind the scenes. Looking at companies like New Belgium brewery and Patagonia, one need not look very far to see that these are places that believe in not only customer satisfaction, but employee satisfaction. These are companies that make it easy to see how a happy employee will translate into higher profits. If a worker is happy in the freedom, benefits, training, and respect he is given from his employer, he will reflect that happiness on customers and the way he does his job. Yes, HR plays a vital role in the continuation of satisfactory operations at any business of any size.

HR is worth the money.

After reflecting on both sides of the issue, the winner is clear. There is no way to discount the viability and importance of human resources in the workplace. If I do not receive sufficient training, I will have no confidence in myself or what I do at work. If I do not receive freedom and flexibility in scheduling and the way I work, I will be unhappy and probably treat my customers with a less than positive attitude. If the company I work for does not invest in things like daycare, dog care, free employee meals, tuition reimbursement, profit sharing, or even just a horizontally structured chain of command, what incentive other than pay do I have to work there? As bad as the current economy may be, this is not the United States of the early 1930’s. We are not a society that must take a job we can get regardless of the conditions or benefits derived from working there. Now while it may be harder to find a job that does offer such great human resource management, in the end, that is truly the incentive we are after. Every employer pays wages. Yes, some higher than others. Still, the differences in pay we are offered are usually not sufficient enough to draw us away from a job that offers a happier workplace or better benefits. My mother has worked for the same doctor for over twenty years. In that time, she has received job offers paying a higher wage per hour than what she makes. She refuses to leave. The reason is she receives such a generous vacation allowance every year. If I were a manager myself, I would not want to hire an individual only interested in working for me because of the great pay I offered. That is not what attracts motivated and passionate people. What attracts motivated and passionate people is an employer who is dedicated to the satisfaction and general well being of the people who work for them. Life, not higher just higher pay, is the important factor to these people. Companies with good HR people know this, and are usually very efficient and productive businesses.

Where do you stand?


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    • dhimanreena profile image

      Reena Dhiman 3 years ago

      Very well written hub with good information