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2013 12: 117Human Resource Development ReviewMeera Alagaraja

LiteratureHRD and HRM Perspectives on Organizational Performance : A Review of

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450868 HRD12210.1177/1534484312450868AlagarajaHuman Resource Development Review

1University of Louisville, Louisville, KY, USA

Corresponding Author:Meera Alagaraja, Workforce & Human Resource Education Program, Department of Leadership, Foundations & Human Resource Education, University of Louisville, KY 40292, USA. Email: [email protected]

HRD and HRM Perspectives on Organizational Performance: A Review of Literature

Meera Alagaraja1

Abstract

A systematic review of literature on the relationship of human resources (HR) and organizational performance (OP) revealed a dearth of contribution from human resource development (HRD) in establishing the linkage. This linkage, which refers to the significant relationship between HRD and OP, is an important topic relevant to research and practice. The review utilized OP as the dependent variable to survey the state of human resource literature and thus, includes contributions from human resource management (HRM). The literature review revealed similarities and differences in the conceptualization of OP as a dependent variable between the two fields. On further analysis, the similarities and differences reveal convergence in specific areas of inquiry as well as emphasize the underlying differences in the philosophical assumptions of HRD and HRM. The independent contributions of HRD and HRM in establishing the HR–OP linkage also reflect the utilization of diverse research designs, methods of data collection, analysis, and findings. Both fields have focused on strategic contributions for improving organizational performance and are very much connected in practice. Much of the separation therefore, appears to be academic where competing views highlight a tension that exists in theory, research and what we know about effective HRD or HRM in practice.

Keywords

human resource development, human resource management, organizational performance

Introduction

Senior executives consistently profess the importance of human resources (HR) in enhancing organizational performance (OP). The HR function, as a significant con-

Integrative Literature Review

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118 Human Resource Development Review 12(2)

tributor in the development and management of people in organizations, is most often perceived as adding less value in comparison to other “critical and essential” business interests. HR departments are often underrepresented at the highest levels of the orga-nization, where key business- and people-related decisions are made (Becker & Huselid, 2009). Strategic business priorities involving operations, processes, products, and services remain critical issues for senior leadership (Becker & Huselid, 2009). Not surprisingly, the vast majority of organizations assess performance primarily based on financial and economic indicators (Haggerty & Wright, 2009). Transforming the “people are our most valued assets” rhetoric into reality is by far one of the biggest challenges facing organizations today.

Traditionally, organizations rely on the HR function in the management of employee- and job-related services such as recruitment, selection, payroll, benefits, employee rela-tions, and legal issues. The strategic role in leveraging employee-related skills, abilities, and knowledge, as a source of competitive advantage, remains an aspirational goal for many HR departments. Few senior executives perceive a significant value and role for the HR function in the development of organization members (Barney & Wright, 1998). Although research has established that a high level of investment in HR practices and systems influences organizational-level outcomes such as labor productivity, turnover, profitability, sales growth, and quality (Bae & Lawler, 2000; Collins & Clark, 2003; Huselid, 1995; Huselid, Jackson, & Schuler, 1997; Lam & White, 1998), companies continue to focus on other organizational functions to achieve corporate goals. Nevertheless, the impact of HR in organizations is an area attracting increasing inter-est from scholars and practitioners.

Purpose StatementAs noted by Ruona and Gibson (2004), the distinction between human resource devel-opment (HRD) and human resource management (HRM) fields is blurring. Both fields have established HR as an important function in organizations. However, they disagree on the definition, role of HR in organizations and how to study that role. Each field focuses on different questions and provides unique understanding and per-spectives about HR. Although scholars view these as competing perspectives, the increasing complexities in organizational contexts underline the need for drawing on the contributions of the two fields. This article argues for a pluralistic approach in treating HRD and HRM perspectives as complementary, and doing so provides an enriched understanding of HR in the scholarship and practice of HRD/M (human resource development and management). To demonstrate this, I build a case using literature from HRD and HRM by addressing HRD/M linkage to OP. Examining the link between OP and HRD/M is important and useful for assessing the value and impact of HR in organizations. The article compares and contrasts HRD with HRM from multiple perspectives such as ontology, epistemology and how the fields are understood (as a construct and/or as a practice). The article outlines some of the significant differences in understanding OP, how those differences developed, the



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implications of the differences, and how this improved understanding is helpful in bridging the research–practice gap in HRD.

Introduction to the Key TermsIn academic environments, HRD and HRM are independent fields. HRD programs are typically aligned to the colleges of education, whereas HRM programs are likely to be based in colleges of business, although in practice these boundaries have begun to blur. The programmatic emphases in HRD are training design, delivery, and evalua-tion, whereas HRM programs have a strong managerial flavor (Kuchinke, 2003, p. 296). Despite the extensive discussion, debate, and documentation of definitions in HRD (McLean & McLean, 2001; Weinberger, 1998), very few discussions focus on OP as the dependent variable. In comparison, scholarly discussion defining HRM produces fewer definitions, but notably links HRM with the concept of OP. Given the focus of the article, definitions of HRD, HRM, and HR associated with OP were selected. The terms HRD, HRM, and HR were operationalized below in Table 1 to begin the literature review process.

Table 1. Definitions of the Key Terms.

Key terms Selected definition

1 Human resource development (HRD) HRD is a process of developing and unleashing expertise for the purpose of improving individual, team, work process, and organizational system performance (Swanson & Holton, 2009).

2 Human resource management (HRM) The design and management of human resource systems based on employment policy, comprising a set of policies designed to maximize organizational integration, employee commitment, flexibility, and quality of work (Guest, 1997; Hendry & Pettigrew, 1990).

3 Human resources (HR) HR is an organizational function responsible for all of the programs, policies, and practices that firms utilize to manage individual employees and teams.

Literature Review Process

The literature review process involved the examination of empirical publications relevant to the HRD/M’s linkage to firm performance. The researcher made four




decisions with respect to the search strategy. The first decision involved the selection of keywords that were defined at the outset to reduce researcher bias. The following keywords were selected for conducting the search in HRD and HRM literatures, respectively: HRD, OP and HRM, OP. The key-word search was performed using Google Scholar to conduct a preliminary assessment of the extent and scope of the review. The search furnished 32,300 results for HRM and 14,400 results for HRD. In order to manage the review process, a second decision was made to exclude practitio-ner reports, books, and other Internet outlets and narrow the list to peer-reviewed publications. The third decision was made to maintain consistency in the search find-ings. Thus, three databases (ABI/ Inform, EBSCO and SSCI) were commanded to refine the search linking HRD/M to OP. All the databases were accessed through online library resources. The fourth decision involved the development of a review protocol to further refine and narrow the final selection of articles for conducting the review and is presented in the next section.

As mentioned before, the search was conducted separately for HRD and HRM. The search results were not limited to a specific date range to ensure full coverage of the topic. The keyword search was performed in the abstract and/or in the article title. This was to ensure that the central line of the research inquiry was consistent with the focus of the literature review. The final list of articles was reviewed, and any redundancies in the citations were removed. The results were verified by using peer member checking to ensure robustness of the review protocol. This was the last step in the refinement and selection of the final tally of the articles before performing the systematic review. Table 2 describes the search results across each database and the final count of articles that were included for the review.

In addition to the articles identified using the above criteria, the HRD/M and OP landscape was carefully scanned to include seminal reviews of HRD and HRM litera-ture. These articles helped the researcher develop an understanding of the important debates and scholarly conversations on the topic in both HRM and HRD. In addition to ensuring the robustness of the literature review process, the reference sections in the seminal reviews (Arthur & Boyles, 2007; Becker & Huselid, 1999; Combs, Liu, Hall, & Ketchen, 2006; Ferris et al., 1998; Garavan, Morley, Gunnigle, & McGuire, 2002;

Table 2. Final Count of the Articles Reviewed on HRD and HRM.

Keyword searchABI/

INFORM EBSCOSocial Sciences

Citation Index (SSCI)

Total articles (repeat articles across the

databases were removed)

HRD, organizational performance

5 9 4 16

HRM, organizational performance

39 30 163 232



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Garavan, O’Donnell, McGuire, & Watson, 2007; Jacobs, 2003; Kuchinke, 1996, 2003; Lengnick-Hall, Lengnick-Hall, Andrade, & Drake, 2009; McGuire, O’Donnell, & Cross, 2005; Swanson, 1995; Wood, 1999; Wright & Boswell, 2002) were culled and compared to the overall publication pool that was laid out for review and analysis. It became apparent that fewer studies examined the HRD role in the OP area (16). The review of articles pertaining to the HRM -OP linkage, on the other hand, revealed a larger set of articles (232). The researcher made two decisions with respect to the analysis of the articles. The first decision related to the coding of the articles separately for the two fields. The thematic results from the analysis of HRM articles were not unique and in fact have been widely reported in the HRM literature (Arthur & Boyles, 2007; Becker & Huselid, 1999; Combs et al., 2006; Wright & Boswell, 2002). Despite the dearth of articles on the topic in the HRD literature, the contribu-tions reveal a “range of theoretical streams” that reflect evolving interests, a general degree of confusion on what constitutes HRD, the intended audiences, and benefi-ciaries (Garavan et al., 2002, p. 9; McGuire, Garavan, O’Donnell, & Watson, 2007). The first decision thus, entailed a close examination of the meaning of HRD/M and how it is studied. The second decision related to how OP is studied in HRD/M. Any substantive differences from this analysis were likely to surface underlying assump-tions and values that define HRD and HRM. Variations if any, in the understanding of OP would be valuable in building knowledge and improving the practice of HRD. In the following section, the analysis of the articles identified from the literature review process is presented.

Coding schemeMost scholars agree that OP is critical in the study of HRD and HRM in organizations. The adoption of OP as a common variable opened up a new line of interpreting the fundamental issues of how HRD and HRM scholars view HR in organizations. The empirical articles identified for the study guided the initial development of coding and category development in the literature review. The abstract from the final list of arti-cles were coded separately for HRD and HRM.

The initial coding adopted a chronological perspective in tracing the evolution and growth of the fields. Scholars hold different ontological views regarding each field (HRD and HRM). They also adopt different epistemologies for conducting research on the HRD and HRM linkage to OP. Based on the purpose of the systematic review, a 2 × 2 matrix was developed to assist the analysis. This organizing system (Table 3) helped in deriving the major themes of the study.

The four cells from Table 2 form the four main themes from the literature. Each cell provides an unique but incomplete understanding of HR in organizations. By combin-ing the insights from the four cells, the article hopes to provide a fuller understanding of areas of scholarship, which will benefit both fields and the practice of HR in orga-nizations. The article begins by presenting the ontological views of HRM and HRD




scholars in relation to OP. This is followed by a discussion of the approaches both fields use for defining OP and the methods used for studying the linkage.

Ontological Views of HRM in Relation to Organizational PerformanceThe HRM literature search yielded two distinctive themes establishing the HRM–OP linkage. Essentially, this linkage helps in describing how researchers view HRM: as (a) a single practice or combination of practices, and (b) as a system (including prac-tices, climate, etc.). The rich literature on the topic area highlights micro-level per-spectives of the HRM function specifically in terms training, recruitment, retention, and compensation.

The two themes pertain to the conceptualization of HRM as a single or combination of practices and as a system of practices and have been extensively reported in the literature (Bowen & Ostroff, 2004; Lengnick-Hall et al., 2009). The first theme exam-ined the effect of individual or combined set of HR practices on OP, and the second underlined the impact of HR as a system on OP.

HRM as a Single Practice or Set of PracticesThe early streams of HRM research investigated the effect of HRM practices on OP. The first research stream involved the examination of single HRM practices (such as training, performance appraisal) and the effect of such practices on firm performance (e.g., Delaney & Huselid, 1996; Delery & Doty, 1996). The second stream of research underscored the combined effect of interrelated HRM practices rather than any spe-cific practice, such as training or compensation, on OP (Arthur, 1994; Delaney & Huselid, 1996; Huselid, 1995; Huselid et al., 1997; Ichniowski, Shaw, & Prennushi, 1997; MacDuffie, 1995). The extensive empirical HRM work has focused on under-standing how single or combinations of HR practices are linked to OP. The evaluation of HRM is understood in terms of the strength of the practice and its effect on OP. The distinction in studying single or sets of HRM practices and OP is important as it underlines the fit and contingent relationships between HR practices and organiza-tional outcomes (Lengnick-Hall et al., 2009).

Table 3. Organizing System for Coding and Analysis.

Ontology Epistemology

HRD in relation to organizational performance

What constitutes HRD? How do HRD scholars study OP?

HRM in relation to organizational performance

What constitutes HRM? How do HRM scholars study OP?



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HRM as a System

In recent years, several mediating constructs that enable or inhibit HRM system impact on OP have been identified. Becker, Huselid, Pickus, and Spratt (1997) recom-mended that HR departments direct their interest on macro-level business outputs and develop a systemic perspective since traditional HR role expectations appeared to have no apparent connection to OP. In Guest’s (1997) HR model, two intervening constructs—HR outcomes (commitment, quality, and flexibility) and behavioral outcomes (effort/motivation, cooperation, involvement, and organizational citizenship)—linked HR strategy and practices to firm-level performance outcomes. While develop-ing an HR -firm performance model for software companies, Paul and Anantharaman (2003, p. 1249) defined a set of intervening variables—“employee competence, team-work, organizational commitment and customer orientation”—to render causal link-ages between HR practices and a firm’s performance (operational and financial). HRM practices aligned closely with organizational strategy reported higher financial outcomes (Delery & Doty, 1996; Huselid, 1995; Youndt, Snell, Dean, & Lepak, 1996).

Although no single HR practice was found to have a direct causal connection with financial performance (Becker & Huselid, 2009), several HR practices, such as train-ing, job design, compensation, and incentives, directly affected operational perfor-mance measures, namely, employee retention, employee productivity, product quality, speed of delivery, and operating cost. Of these, operational measures, employee reten-tion, and, to some extent, employee productivity have been traditionally associated with HRM system outcomes, although these and a few individual HRM practices (job design, work environment) are dependent on enterprise-level dimensions such as orga-nizational strategy and business orientation.

HRM structure and design is determined by the organization’s business and strate-gic initiatives (Becker & Huselid, 1999). As a formal system, HRM provides an important foundational support for training and performance. Although the quality of HRM system and outcomes is dependent on organizational-level business initiatives, scholars have taken the approach that HRM as a system is an important component that can help an organization become more effective and achieve competitive advan-tage (Becker & Huselid, 1999). A related perspective has framed HRM system–firm performance linkage as a process through which a set of intervening variables are generally aligned in ways to ensure that the HRM system is a source for competitive advantage (e.g., Becker & Gerhart, 1996; Wright, McMahan, & McWilliams, 1994).

Wright and Snell (1998) linked HRM practices to strategy by demonstrating a case of sustainable “fit” of HRM practices with company strategy. HRM practices aligned closely with organizational strategy reported higher financial outcomes (Delery & Doty, 1996; Huselid, 1995; Youndt et al., 1996). There is a lack of consensus on what constitutes HR systems or practices and how these individually or as a combination define the construct of HRM (Paauwe & Boselie, 2005). Different themes emerging




from the literature review HRM as best practices (Delery & Doty, 1996) or consider internal fit. While Boxall and Purcell (2003) argue the case for emphasizing both best practices and the internal fit approach. Wood (1999) noted internal, organizational, environmental, and strategic fit as four different types of fits that consider different linkages in establishing HR contribution to firm performance.

The HRM–OP linkage shaped the agenda of the HRM field in the 1990s and asserted the value and impact of HR in organizations. In addition to improving our understanding of the linkages between HRM and OP, the empirical conversations sig-nificantly influenced the formulation of strategic role for HR in organizations. The HRM discipline reframed the traditional role of HR departments from a maintenance/administrative function to that of a strategic business partner. The intellectual roots of the field suggest that HRM contributions emphasize fuller integration of micro- and macro-level approach theories and analysis linking HR with organizational-level per-formance outcomes. This is an important perspective on the role and contribution of HR to the bottom-line performance in organizations. The underlying assumption of HRM suggests that the field values the managerial paradigm in that HR policies, prac-tices, and systems are designed to enhance organizational and individual performance. Thus, investments in human capital benefit the performance of the organization. This overarching philosophy is also important to understand from an HRD perspective. In the following section, HRD perspectives on the linkage to OP are discussed.

Ontological Views of HRD in Relation to Organizational PerformanceIn order to follow a consistent method for investigating the similarities and differences in the HRD/M-OP relationship, I examine the work of HRD scholars toward estab-lishing the HRD–OP linkage. As a field, HRD strongly identifies with career develop-ment (CD), organization development (OD), and training and development (T&D) domains (Swanson & Holton, 2009). Theoretically, these HRD activities (OD, T&D, and CD) may be treated as a bundle of HR competencies that mediate “human exper-tise and human effort” in organizations (Ruona, 2000 & 2001). The earliest contribu-tion in establishing the importance of HRD-OP linkage emphasized workforce productivity as an OP outcome (Swanson, 1995), but the HRD-OP area has remained largely prescriptive. For example, Jacobs (2003) argued for investigating the linkage between employee development programs and OP.

Watkins and Marsick’s (2003) seminal work on the learning organization is perhaps the most significant contribution in establishing the HRD -OP linkage. Their model highlighted the learning organization characteristics as an important component of HRD at the individual, team, and systems level of the organization. This significant contribution established the effect of HRD on OP. In addition, organizational culture has also been acknowledged to significantly affect performance-related outcomes within organizations (Egan, Yang, & Bartlett, 2004). Empirical support for HRD as a single practice or combination of practices affecting OP however, has been found



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lacking (Katou, 2009). This is not a flaw, as HRD researchers highlight multilevel (individual, team, organizational) perspectives to establish the linkage to OP. This is in sharp contrast to the HRM field, which emphasizes a different vantage point.

Viewing HRD as Learning at the System LevelThe examination of processes within the HRD subsystem and, their relationship with the production system, measurement, and evaluation also received the attention of scholars (Wang, Dou, & Li, 2002). The systems approach was combined with a focus on fulfilling internal and external stakeholder needs in other HRD studies. Ellinger, Ellinger, Yang, and Howton (2002) and Jashapara (2003) found positive relationships between learning organization characteristics and OP. The contributions of HRD in advancing the linkage to OP are limited but no less significant than HRM contribu-tions. From the standpoint of HRD, connections between structural, cultural, and system characteristics of the organization and their effect on higher levels of perfor-mance were central in addressing the HRD–OP linkage.

Usefulness of Comparing the HRD/M Organizational Performance LiteratureThe comparisons of the HRD and HRM contributions toward enhancing the linkage between HR and OP are important from an HRD perspective. The multiplicity of per-spectives that define HRD as a field potentially offers new lines of interpretation to the HRD/M–OP conversations. The HRM–OP conversation has begun to explore and accept different methodologies and paradigms (qualitative, systems perspective) toward approaching the linkage between HR and OP. In addition, the HRD/M–OP link-age literature would also benefit from the more critical/social constructivist HRD scholars, who do not use OP as an important outcome of HR work in organizations (McGuire et al., 2005). Thus, HRD scholarly conversations could advance current debates on the HRD, HRM and OP connection. For example, strong linkages to OP support an expanded role for the HR departments in addition to increasing their cred-ibility and reputational effectiveness (Alagaraja & Toby, 2011). Perceptions of the strategic role of HRD and HRM functions in organizations are diminished when the linkage to performance is weak (Alagaraja, 2013). These findings are important since they continue to advance the scholarly interest in developing robust models of the HRD/M connection to OP.

Two other conclusions can be drawn from comparing and contrasting the HRD/ M–OP literature. With respect to HRM and HRD, the “content” of an HRM system and an HRD system are dissimilar. For example, in the HRM studies, there is confu-sion about what components constitute the HRM system. In HRD studies, aside from adoption of the systems perspective (Swanson & Holton, 2009) as a foundational the-ory, there is little discussion on the HRD system. In terms of individual HRM or HRD




practices, there is some similarity as both fields have investigated T&D practices extensively. In addition to this, three other practices (compensation, performance man-agement, recruitment and selection) were reviewed extensively in the HRM literature. However, these practices may have different levels of impact on OP since HRM or HRD systems have been understood differently and are not comparable. This is espe-cially true when “comparing best-practices and best-fit concepts” in both literatures. These concepts should be considered carefully in comparisons because the best-fit concept carries the influence of organization and the HRD/M or HRD practices on OP. Although scholars have argued that both concepts may be right in their own way (Boxall & Purcell, 2003), “the best-fit approach” highlights the importance of external and internal organizational contexts in the design and effectiveness of HRD/M best practices in the workplace (Paauwe, 2005). However, both approaches are important in exploring the HRM and HRD linkage to OP.

Therefore, it is not surprising that OP is a common thread in comparing the research and practice of HRD or HRM in organizations. Some scholars have also used the term firm performance. Although the article does not view firm performance as an alterna-tive concept to OP, the two phrases have been used interchangeably in HRD and HRM literature. It is interesting that both HRD and HRM scholars define OP using different sets of indicators. These divergent explanations represent different epistemologies in the study of HR in organizations. An analysis of how OP is defined, understood, and studied by HRM and HRD literature is presented in the next section.

Epistemological Differences in Studying Organizational PerformanceOP has been addressed in a broad manner in the management sciences. These descrip-tions help in defining as well as identifying universally accepted perspectives of OP. Since OP is a common variable in the management sciences, this section presents generally understood perspectives of OP in the management literature.

Early conceptualizations of OP in the management sciences describe OP (a) as a set of goals of the organization such as profitability and turnover (Etzioni, 1964), (b) inter-nal and external resources utilization (Yutchman & Seashore, 1967), and (c) fulfilling internal and external stakeholders’ needs (Thompson, 1967). These descriptions were useful in developing comparisons between HRM and HRD perspectives on OP. The insights gained from this examination would be valuable since these variations have not been explicitly discussed in the HRD literature. The new insights would also enhance the value of HRD practice in an increasingly complex global context. In what follows, HRM and HRD perspectives on OP are compared and contrasted. These perspectives add value, expand, and enrich our understanding of research, theory, and practice of HR in the HRD and HRM literature. They also stimulate future avenues of research and practice and spark debates on the further evolution of the two fields. The next sec-tion discusses how OP is studied in HRM.



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Measures of Organizational Performance Utilized in HRM

The HRM literature reveals the following most frequently used OP measures: organi-zational and employee productivity, perceptual measure of organizational and market performance, organizational turnover, corporate financial performance, profitability, sales growth, and quality. The measures are consistently quantitative in nature, captur-ing macro-level performance metrics. One outcome of this review reveals a lack of uniformity in the use of OP measures. In the following paragraphs, a synthesis of research studies (Katou, 2009; Wright & Boswell, 2002) reporting organizational measures in HRM is presented.

Productivity. Two measures of productivity—(1) employee, and (2) organizational level—were used by several scholars to capture OP measures and are described sepa-rately. However, the studies did not use a combination of both indicators as a measure of performance. Employee productivity was measured as labor efficiency in terms of dollar output spent on labor (Cappelli & Neumark, 2000). Other scholars (Bae & Lawler, 2000; d’Arcimoles, 1997; Koch & McGrath, 1996; Wright, Gardner, & Moynihan, 2003) also viewed labor productivity in similar terms to measure the efficiency of the labor force. Richard and Johnson (2001) evaluated the net income per employee. MacDuffie (1995) measured labor productivity, but adjusted for absenteeism. Organi-zational productivity was measured in terms of sales per employee (Huselid, 1995; Huselid et al., 1997; Ichniowski & Shaw, 1999; Konrad & Mangel, 2000).

Perceptual measures of organizational and market performance. Measures examined under the organizational and market performance constructs were composed of inter-changeable survey items asking respondents to evaluate and compare the performance of their organizations with competitors. Diverse organizational and market perfor-mance measures were utilized. According to Delaney and Huselid (1996), perceptual OP measures addressed product quality, customer satisfaction, and new product devel-opment. Harel and Tzafrir (1999) also covered similar aspects and included employee acquisition and retention. Perry-Smith and Blum (2000), in addition to the aforemen-tioned measures, incorporated employee–management relationships. Financial and operational performance measures such as change of business results, forecasts, and estimated changes in the market share, were compared by Lahteenmaki, Storey, and Vanhala (1998). Perry-Smith and Blum (2000) assessed perceived market performance relative to that of other firms in terms of marketing and market share. Parallel to the earlier study of Delaney and Huselid (1996), Harel and Tzafrir (1999) paid attention to profitability, market share, and accounting for product price and sales increase. In all these studies, researchers asked respondents to evaluate the performance of their orga-nizations in comparison to their competitors over a period of time. Some scholars mea-sured market performance in purely economic terms such as profitability and market share (Delaney & Huselid, 1996; Harel & Tzafrir, 1999) and others measured the per-formance on process outcomes. For example, public image and goodwill were also measured by Bae and Lawler (2000), whereas Montemayor (1996) assessed market performance in terms of product/service quality, customer satisfaction, and customer retention.




Organizational turnover. Huselid (1995) included two measures of turnover separately for exempt and nonexempt employees. The average annual turnover included both vol-untary and involuntary departures. Richard and Johnson (2001) collected annual turn-over measures for nonexempt employees as a measure of organizational turnover. Industry-specific turnover measures were analyzed by Shaw, Delery, Jenkins, and Gupta (1998). Measures of driver turnover as a percentage of total firm employment were reported separately for both voluntary and involuntary separations in their study.

Corporate financial performance. Standard market-based measures of short-term (annual) profitability—gross rate of return on assets (GRATE)—were utilized as mea-sures of OP (Bae & Lawler, 2000; Huselid, 1995; Huselid et al., 1997). Traditional measures of accounting profits such as the return on assets and return on equity were calculated (d’ Arcimoles, 1997; Delery & Doty, 1996; Lam & White, 1998; Lee & Chee, 1996; Lee & Miller, 1999). Return on equity, the ultimate measure of the finan-cial strength of the institution, was included in some studies (Delery & Doty, 1996; Lee & Chee, 1996; Richard & Johnson, 2001). Two research studies also measured stock performance by the extent to which firms maximized shareholder value by assessing the annual growth rate of the organization’s stock market value (Collins & Clark, 2003; Lam & White, 1998).

Profitability. Increased firm profitability over a period was another OP measure uti-lized in the identified literature (Bae & Lawler, 2000; Banker, Lee, Gordon, & Srinivasan, 1996). Several studies included both profitability and sales growth as a combination to assess OP (Perry-Smith & Blum, 2000; Terpstra & Rozell, 1993; Wright et al., 2003). Simons, Pelled, and Smith (1999) conceived top management performance in terms of increased firm profitability and sales. Wright et al. (2003) also incorporated oper-ating expenses as an OP measure.

Sales growth. Another important measure of OP was the calculation of the average annual growth in sales for a specific period. This measure was used to indicate the extent to which customers accepted the firm’s products and services (Bae & Lawler, 2000; Collins & Clark, 2003; Lam & White, 1998; Lee & Chee, 1996; Simons et al.,1999). In another study, individual average monthly sales were developed to assess sales productivity (Batt, 1999).

Quality. Self-reported measures of quality were reported by respondents indicating their work group’s service quality as well as product service quality improvements, according to Bae and Lawler (2000) and Batt (1999). MacDuffie (1995) and Wright et al. (2003) measured the number of defects or errors per pieces of the vehicles empha-sizing fit and finish of the final product. Shaw, Gupta, and Delery (2001) captured quality as a ratio of out-of-service percentage due to driver fault to the total number of inspections. Montemayor (1996) also added effort performance as a measure to esti-mate the percent of employees who manifested extra-role behavior that improved the overall quality performance of the organization. Customer satisfaction data was also utilized to capture long-term performance data (Banker et al., 1996). In addition, the ratio of workers compensation expenses to sales (Wright et al., 2003) and accident frequency ratio (Shaw et al., 2001) were other quality-related measures adopted as a measure of OP.



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Measures of Organizational Performance Utilized in HRD

In contrast to HRM studies, both traditional and nontraditional indicators of OP have been explored in HRD literature. Several HRD scholars examined the learning organiza-tion characteristics and impact on bottom-line performance (Baek-Kyoo Joo, 2010; Egan et al., 2004; Ellinger et al., 2002; Gilbreath & Montesino, 2006; Kontoghiorghes, Awbrey, & Feurig, 2005).

Turnover intention. HRD scholars highlighted turnover intention as a key element for predicting turnover behavior (Baek-Kyoo Joo, 2010; Bedeian, Kemery, & Pizzolatto, 1991; Bluedorn, 1982; Koch & Steers, 1978; Lee & Bruvold, 2003). Turnover inten-tion, or the intent to leave, was identified as the single best predictor of turnover. Ulrich, Halbrook, Meder, Stuchlik, and Thorpe (1991) found that a decrease in turnover enhanced OP. Based on several studies, Egan et al. (2004) suggested turnover intention as a strong precursor to turnover, as has been widely verified in the literature (Abrams, Ando, & Hinkle, 1998; Lee & Mowday, 1987; Michaels & Spector, 1982). Articles in this area suggested that turnover intention influences the relationship between HRD and OP.

Strength of HR orientation. The human resource orientation in companies and link-age to corporate performance was examined by Lam and White (1998). They found that companies with a strong HR orientation performed significantly better than firms with a weaker HR orientation. The strength of the HR orientation was determined by three behavioral components—attraction, retention, and development of the firm’s human capital. Organizational or corporate performance was determined by using three measures: return on assets, growth in sales, and growth in stock values.

Learning organization characteristics. The examination of processes within the HRD subsystem, their relationship with the production system, and measurement and evalu-ation also received the attention of scholars (Wang et al., 2002). The systems approach was combined with a focus on fulfilling internal and external stakeholder needs in some HRD studies. For instance, Ellinger et al. (2002) and Jashapara (2003) found positive relationships between learning organization characteristics and OP. Ellinger et al. (2002) examined correlation with the dimensions of the learning culture ques-tionnaire and the financial performance measures of organizations in a national con-text, providing an economic rationale for creating a learning culture. Several others have conducted large-scale national and international studies with different types of organizations and employee groups (Dymock, 2003; Hernandez, 2003; McHargue, 2003; Sta-Maria, 2003). Watkins and Marsick (2003) recommended the need for more studies using this approach for establishing evidence of validity and credibility of HRD constructs. In another study, Kontoghiorghes et al. (2005) examined the relationship between certain learning organization characteristics and change adaptation, innova-tion, and bottom-line OP. The authors defined OP in terms of quality, productivity, profitability, organizational competitiveness, and employee commitment indicators.

The focus in HRD in relation to OP remains exclusively on performance improve-ment at the level of the individual and the team. Thus, the nature of the scholarly




inquiry has seldom moved beyond individual and team processes, structuring inter-ventions at these two levels, and long-term emphasis on training, learning, and devel-opment. As the literature demonstrates, the connection of human effort to organizational outcome can be tenuous. Multilevel empirical research demonstrating cause at one level (person) and effect at another (organization) is complex. It is not necessarily a flaw or gap in HRD literature because the discipline and its foundations are not as focused as HRM on OP outcomes. This is an important and fundamental issue that is discussed in the following section.

The analysis of the literature review considered the following measures of OP in HRM: productivity, market performance, organizational turnover, financial perfor-mance, profitability, sales growth, and quality. The following measures of OP were considered in HRD: turnover intention, learning organization characteristics, and strength of HR orientation. The measures with respect to HRM refer to “ultimate” mea-sures in the HRM–OP relationship, the measures with respect to HRD refer to “media-tion” measures in the HRD–OP relationship. It is apparent that the performance outcomes of HRD are captured through the use of mediation measures. In contrast, HRM utilizes financial outcomes (profits, sales, market share, Tobin’s q, GRATE), organizational outcomes (productivity, quality), and “mediation measures” similar to HRD (satisfaction, commitment, and turnover intention) to conceptualize OP. In the next section, I discuss the key findings from the literature review highlighting the dif-ferences in approaches in the two fields in identifying and exploring the dependent variable and the underlying philosophies that guide and inform them.

DiscussionThe scholarly conversations pertaining to HRD definitions reveal divergent perspec-tives in understanding the role of HRD at multiple levels of the organizations (and at the national level) for the purpose of enhancing learning and performance. Given the multiplicity of perspectives in HRD, numerous theories and theoretical frameworks thus, inform the field and continue to energize the scholarly conversations that expand the field. In comparison, the HRM focus is concerned with the scholarly debates over the best-practice versus best-fit approach, the components of the HRM system, the inclusion of different employee groups, and the perceived effect of practices (Paauwe, 2005). Three theoretical frameworks dominate and inform these HRM concerns: the “contingent framework,” which suggests that HRM influences performance in relation to contextual factors from the external environment such as business strategies (Schuler & Jackson, 1987); the “resource based view,” which asserts that HRM influences per-formance according to the human and social capital held by the organization (Barney, 1995); and the “AMO theory,” which asserts that HRM influences performance in relation to employees’ “ability,” “motivation,” and “opportunity” to participate (Appelbaum, Bailey, Berg, & Kalleberg, 2000). In contrast to HRM, seminal conver-sations in HRD reveal that the theoretical frameworks and theories are too numer-



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ous to mention. The underlying philosophical assumptions of HRM and HRD inform these dominant theoretical frameworks in the area.

Empirical studies exploring the HR linkage to OP provide a list of frequently mea-sured organizational-level performance indicators. These quantitative indicators pro-vide a baseline for the evaluation and assessment of OP improvement and effectiveness. The overarching themes of HRD studies expand on the strong linkage between learning organization characteristics and firm performance. Thus, important contributions of the HRD-OP linkage literature emphasize learning organization characteristics. It is clear that HRD places importance on the learning organization characteristics to determine and establish a connection with OP. There is limited evidence of empirical studies that examine these linkages in HRM. The learning versus performance debate (Kuchinke, 1996) is an outcome and a reflection of the importance HRD lays on the learning orga-nization characteristics. These characteristics are important intermediating mechanisms that determine the strength of OP outcomes. This stream of research also suggests that HRD places importance on the role of formal, informal, and other forms of learning organization and training. HRD scholarship emphasizes a systems-based organic approach to uncovering complex relationships and discerning the nuances in the intri-cate linkages involved in fulfilling internal and external stakeholder needs through the adoption of different variables (e.g., organizational commitment, prediction of turn-over). The wealth of HRD scholarship in the HRD-OP linkage topic appears to empha-size the intangible mechanisms that are significant but difficult to explicate in understanding the value and contribution of HRD to OP.

The learning organization model developed by Marsick and Watkins (2003) is a significant HRD contribution in advancing the literature on the HR-OP linkage. Their contribution toward the development of comprehensive learning organization charac-teristics is also a reflection of the philosophical assumptions that characterize our field. There is growing evidence of scholarship utilizing OL as a conceptual or a theoretical framework from different disciplines (Ellinger et al., 2002; Jashapara, 2003). Although achieving consensus on a common definition of HRD has been difficult, the adoption of the learning organization model has brought about a great deal of acceptance among HRD scholars in establishing the connection between HRD and OP. In comparison, the everyday management of the traditional HR function in organizations continues to occupy the interest of HRM scholars. The HRM field closely identifies itself with the components that constitute the traditional HR function. HRM scholars emphasize objective measures of OP. Empirical studies in HRM established the effect of HRM practice, policies, and systems on, and their relationship to, OP using quantitative measures.

Organizational Performance as an OutcomeThe stream of HR-OP performance research was a milestone in the evolution of HRM as a separate discipline (Swanson & Arnold, 1996). This stream of research addressed




an important debate about the importance of HR in organizations that continues to this day in practice

The HRM approach in addressing the linkage between HR and OP suggests that scholars aimed to achieve the same level of importance for HR as other traditional and direct functions/departments (operations, finance, quality, marketing, and sales) in the organization. The HRM philosophy placed more emphasis on assessing the impact of HR practices, policies, and systems on the financial success of the organization. In contrast, the HRD research stream reflects a more humanistic, holistic, and systemic approach, with scholarly inquiries focusing on learning and performance at the level of the individual, team, and the organization.

A great diversity of philosophical and theoretical perspectives and the accompany-ing debates in HRD reflect the emphasis on the “development” of human resources. In contrast, it appears that the significant HRM focus on OP indicators as measures of financial, sales, or operational outcomes reflects the “management” orientation in addressing the linkage between HR and bottom-line performance.

The HRM scholarly contributions in establishing the HR-OP linkage has been sub-stantive in comparison to HRD, where this line of inquiry has not been pursued as vigorously. However, HRD has much to offer to advance research in this area. For example, HRD theories support the examination of characteristics such as context, strategy, and culture as socially complex systems (Watkins & Marsick, 2003), although fewer scholars have contributed significantly in utilizing systems-level thinking to guide empirical studies in the HRD-OP linkage. Empirical studies have typically focused on employee-level performance indicators or micro-level approaches (Kuchinke, 1996), with the exception of the studies conducted by Ellinger et al. (2002) and Jashapara (2003), where positive relationships between certain learning organiza-tion characteristics and objective measures of OP were explored.

It appears that a great diversity of philosophical and theoretical perspectives take the HRD focus away from some of the more important challenges facing HR practitio-ners. However, multitheoretical and diverse perspectives have been foundational to the development of HRD as an independent discipline, where scholars wrestle with competing paradigms and individual-, team-, and organizational-level approaches within the organization. This is a potential area of opportunity for HRM. HRM must leverage HRD’s multitheoretical and diverse perspectives to reconcile competing pri-orities at the level of the individual, team, and the organization to expand the HR-OP line of inquiry.

Methodological DifferencesDifferent data designs produce different results (Wright, Gardner, Moynihan, & Allen, 2005). Thus, when data designs are categorized into (a) “predictive” (i.e., practices are not measured before the performance period), (b) “post-predictive” (i.e., practices are measured after the performance period), (c) “contemporaneous” (i.e., practices are measured contemporaneously with performance), and (d) “retrospective” (i.e., prac-



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tices are measured based on past performance period), they contribute to variations in the findings on the linkage between HRM, HRD and OP. Thus, methodological dif-ferences produce mixed results. In this section, I consider the methodological differ-ences when comparing HRD/M and OP linkage.

The quantitative approaches in some of the studies (Bae & Lawler, 2000; Delery & Doty, 1996; Huselid, 1995; MacDuffie, 1995; Shaw et al., 1998) relied on single-member responses for gathering organizational-level performance and HR practices data (Patterson, West, & Wall, 2004). These studies utilized cross-sectional data collec-tion methods involving multiple firms, across or within particular industry sectors, enabling generalization of findings. In contrast, fewer longitudinal studies (Cappelli & Neumark, 2001; Huselid, 1995) investigated HRM and firm performance relationship. Large-scale survey designs dominate the HRM–OP research stream. The findings from quantitative-based designs have resulted in “offering snap shots” and high-level analy-sis of HR-OP linkages. HRM studies imply deterministic, static, and objective notions of the linkage between HR and OP. These notions also influenced the HRD line of inquiry in determining HR’s relationship to OP-level outcomes.

The qualitative methodology, on the other hand, offers a different line of approach in addressing the HR–OP linkage. This methodology addresses the notion of HR prac-tices as institutionally embedded. Thus, accessing multiple respondents in every orga-nization is required to obtain a variety of perspectives. By focusing on the influences of local contexts on organizational members, the qualitative approach is well-suited for examining micro-level approaches toward establishing the linkage between HR and OP. The multiplicity of perspectives that define HRD allow for the adoption of a variety of research methods. In contrast, several HRM scholars have only recently begun to call for qualitative studies (Becker & Huselid, 2009). Therefore, it is not sur-prising to note that the HR–OP linkage has been examined exclusively through the lens of quantitative research. Building cumulative evidence from a variety of research designs, methodologies, and data collection sites will strengthen scholarship and cred-ibility for HRM and HRD theory, research, and organizational practice. Both large-scale studies and small, highly contextualized studies would advance the scholarly inquiry on the HR-OP linkage (Alagaraja & Egan, 2011). The qualitative methodology also complements the many quantitative research studies. More important, the method-ology would elaborate the dynamic interactions among key organizational decision makers on how the HR-OP linkage is achieved in organizations.

Conceptualization of HRD/MOne outcome of the review is to suggest the adoption of the term “HRD&M” as a better approach for defining HR to include people management (HRM) and develop-ment aspects (HRD) as a combined system of practice, policies, and performance outcomes. A new term HRD&M is proposed as a more inclusive reflection of the work HRM and HRD professionals do in organizations. As more organizations look to




adopt broad approaches in practice, a more accurate reflection of the practice of HRM and HRD in organizations as HRD&M is useful. However, this may not always be the case, and there may be some resistance in larger organizations with resources or the wherewithal to have separate HRM and HRD departments.

HRD/M can also be considered as a field of theory, research, and practice involving the management and development of human resources in organizations. HRD/M func-tion includes human capital “development” at the individual level (knowledge, skills, and abilities), social networks and relationships (social capital), and human capital “management” of human resource systems based on employment policy, comprising a set of policies designed to maximize functional and organizational integration, employee commitment, flexibility, and quality of work that support HR systems and structures within an organizational context. The work of Gilbreath and Montesino (2006) recom-mended an expanded HRD role to include both employee well-being and OP. The con-ceptualization of HRD/M is similar to the goals stated by their research. Organizations need to develop a greater understanding of HRD&M as a system with clearly defined performance expectations and outcomes (Colakoglu, Hong, & Lepak, 2009). Effective HRD&M systems integration with operational aspects of business is thus imperative for the performance and improvement of individuals, processes, and the organization as a whole (Becker & Hueslid, 2009; Guest, 1997). The goal of HR function involving the development and management aspects thus, places a central value in simultaneously embracing the development and management of the HR function. Achieving balance between competing employee and organizational demands and needs would contrib-ute toward effective OP. Thus, HRD&M can be understood as a field involving the management and development of human resources in organizations. HRM&D func-tion includes human capital at the individual level (knowledge, skills, and abilities), social networks and relationships (social capital), and organizational capital.

Need for Systems-Level PerspectivesMore research in utilizing systems-level perspectives is required to address the gaps in the literature. Based on research evidence to date, HRM scholars have devoted a great deal of attention examining HR practices and OP using macro- and micro-level approaches. In HRD, although the focus has been on system-level issues that contex-tualize, influence, and direct organizational-level outcomes, the performance indica-tors have typically focused on employee-level performance indicators (Kuchinke, 1996) with the exception of Watkins and Marsick (2003).

Role of the HRD/M FunctionAlthough empirical support for the impact of HRM and HRD as practices and as a system on OP is well-established, the actual role of HR as an organizational function has been largely neglected (Haggerty & Wright, 2009). The impact of the HR function



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in organizations and their contributions to OP has not received attention from either fields. This is a major gap that was identified in the literature review. Both HRM and HRD need to support practitioners in the application of theories, research, and models for evaluating the performance and service delivery of HR function.

Strategic PerspectivesThe implementation of strategy is important in establishing the HR-OP linkage. Becker and Huselid (2009) call for future research studies in the implementation of strategic human resource management (SHRM). According to them, strategy imple-mentation is an equally important area of study as SHRM theory development. Other notable empirical research gaps from the literature call for identifying key intermedi-ate outcomes in accomplishing strategy implementation (Doorewaard & Meihuizen, 2000) and increased within-industry studies (such as Doorewaard & Meihuizen, 2000; MacDuffie, 1995). These scholars suggest the need for balanced perceptions toward understanding HR performance, taking into account multiple stakeholder expectations. Haggerty and Wright (2009) contend that the strength of an HR sys-tem contributes to desired organizational-level performance and recommended future research in this area. These are complex constructs that need in-depth under-standing of the interacting dynamics between organizational culture, structure, strat-egy, and context.

Gilley and Maycunich (2000a, 2000b) recommended the integration of HRD as a strategic partner to maximize OP. Garavan (2007) and Holton and Yamkovenko (2008) have also called for studies examining the impact of strategic human resource devel-opment (SHRD) on firm-level performance outcomes. The theoretical and intellectual debate about the importance of HRD or HRM as a strategic partnership has not yet translated into an established line of inquiry. There is a convergence across both fields in the conceptualization and positioning of strategic human resource development and management (SHRD&M) for conclusively establishing the effect of human resources on OP.

ConclusionsThe accumulation of research evidence for HR-OP linkages would make a strong case for greater role, status, and influence of the HR function in organizations. The general and academic discourse on the effect of HR function in organizations continues to remain an underdeveloped area. Greater integration of HRD and HRM theoretical perspectives and the general HR practitioner discourse would significantly improve the role, status, and influence of HR function on OP. It would also help in developing a deeper understanding of HR functional service capacity and performance delivery in organizations. To do so, research studies adopting innovative approaches are needed to enhance our understanding of HR performance, taking into account multi-ple stakeholder expectations. The article recommends that both HRD and HRM draw




from each other’s strengths, acknowledging their contribution in the development, furthering of knowledge, and application of theories in improving HR service delivery and its impact on firm performance. The progress in achieving the HR–OP linkage in theory, research, and practice cannot be overstated. To be valued as a strategic and tactical source of competitive advantage, HRD and HRM need to draw on each oth-er’s disciplinary perspectives, assumptions, and methodologies to fully leverage the development and management of human resources -- the most important of all orga-nizational resources. Both fields have sought to become more strategic over the past two decades and are very much connected in practice. Much of the separation, there-fore, appears to be academic. The synergy between the two disciplines would help in fully translating the “people are our most valuable assets” rhetoric into reality.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

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Author Biography

Meera Alagaraja is an assistant professor of human resource development at the University of Louisville. Her research interests include strategic HRD, performance interventions, interna-tional HRD, and learning in organizations. Her work has appeared in publications such as Human Resource Development Review, Human Resource Development International, and the Human Resource Development Quarterly.



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