Frequency of Use of Different Measures of Firm Performance
To assess the different types of measures of firm performance that have been used in strategic HRM research, we examined the published literature linking HR practices to organizational-level measures of performance. Studies were gathered from the three special issues noted above, along with other studies of a similar caliber that have appeared in top level HR journals. We limited our search to published studies because we felt it important to examine only those measures used in research studies which have passed a refereeing process. We recognize that this may skew the results if studies using certain types of measures are being systematically rejected (i.e., it is the referee process, and not the research designs which have limited the types of measures). However, if that were the case, the implication might only be that our suggestions regarding performance measures might apply more to reviewers than to researchers.
This investigation builds on work done by Dyer and Reeves (1995) and Paauwe and Richardson (1997). Dyer and Reeves (1995) reviewed 4 studies on the impact of “bundling” HR practices on firm performance. Paauwe and Richardson (1997) identified 9 different studies containing 22 empirically established relationships between HRM and performance. Expanding on these lists, we identified a total of 33 studies on this relationship. Of these 29 were found to have quantifiable comparable variables (empirical data). Thus, our analysis is based on the empirical results of the 29 studies containing 80 distinct observations of an empirically tested link between HRM and organizational performance.
In categorizing the different measures, we adapted the typology offered by Dyer and Reeves (1995). These authors broke down performance measures into human resource, organizational, financial, and market measures. We followed these categories as closely as possible using only the preselected group of articles from the journals previously mentioned. In our analyses, the human resource category consisted of 3 studies that measured turnover. The organizational category contained measures of productivity, quality, customer satisfaction and manufacturing flexibility, The financial accounting category included measures of return on assets (ROA) return on equity (ROE), profits, sales and employee value. The financial market category consisted of measures of stock price, and two other measures derived from Tobin’s Q.