The Effect of HRM Practices on the Perceptions of Organizational and Market Performance of the Firm

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THE EFFECT OF HUMAN RESOURCE MANAGEMENT PRACTICES ON THE PERCEPTIONS OF ORGANIZATIONAL AND MARKET PERFORMANCE OF THE FIRM
Gedaliahu H. Harel and Shay S. Tzafrir

The purpose of our study is to extend the emerging empirical literature on the firm-level impact of human resource management practices. Results based on a national sample of organizations from private and public sectors in Israel indicate that these practices have a significant impact on both the perceived organizational and market performance of the organization. The single independent variable found to be statistically significant in affecting perceived organizational performance was training practices. In the case of perceived market performance, we found that, in addition to training practices, employee selection practices also significantly affected the perceived market performance.1 © 1999 John Wiley & Sons, Inc.

Introduction In today’s world, organizations are in a constant state of competition. The intensity of competition increases annually and the need to continuously improve organizational performance has never been greater. Managers must be on a constant lookout for ways to maximize their organizations’ strategic resources. The resource base approach contends that the organization can develop a sustained competitive advantage only if its activities create value in a unique way, one that competitors cannot easily copy (Barney, 1986; 1991; 1995). This approach transfers the emphasis from the organization’s competitive environment to the resources it can develop to use in this environment (Miller & Shamsie, 1996). The decreased importance of traditional sources of competitive success has led to the increased significance of human resources as part of the organization’s intangible