Impact of people management practices on organizational performance: analysis of a causal model

Abstract

Although researchers in strategic human resource management have established a relationship between HRM practices and organizational performance, the intervening process connecting HRM system and organizational performance remains unexplored. This paper, based on a study on Indian software companies, is an attempt to develop and test a causal model linking HRM with organizational performance through an intervening process. The study has found that not even a single HRM practice has direct causal connection with organizational financial performance. At the same time, it has been found that each and every HRM practice under study has an indirect influence on the operational and financial performance of the organization. Further, HRM practices such as training, job design, compensation and incentives directly affect the operational performance parameters, viz., employee retention, employee productivity, product quality, speed of delivery and operating cost.