The HR department's role in organisational performance

TLDR

Research on HR’s contribution to organisational performance is abundant but hampered by challenges such as the black‑box problem, time‑lag effects, and varied performance metrics, making the HR department’s role critical yet frequently overlooked. The study longitudinally investigates how the HR department’s growing importance relates to financial performance, employee commitment, and morale. The findings reveal that despite rising HR importance and strong financial results, tensions between HR strategy rhetoric, employee experience, and human‑capital focus undermine sustainability, highlighting a conflict between management and employee interests.

Abstract

Research into how HR contributes to organisational performance is plentiful yet plagued by challenges. Alongside the 'black box' issue between HRM and performance, the time-lag effect and the range of performance indicators applied, the role of the HR department in this relationship is critical although often ignored. A longitudinal case study is presented here that focuses particularly on this issue, and shows a complex picture of improving HR department importance alongside high-level financial performance, but declining employee commitment and morale. The article suggests that the tensions between the rhetoric of HRM strategy, the grim reality of the employee experience and a lack of focus on human capital meant the outstanding financial performance was not sustainable in the longer term. The inherent conflict in serving both management and employees in process-and peopleorientated roles is highlighted.