The relationship between HR practices and firm performance: examining causal order, in: Personnel Psychology 58

Significant research attention has been devoted to examining the re-lationship between HR practices and firm performance, and research support has assumed HR as the causal variable. Using data from 45 business units (with 62 data points), this study examines how measures of HR practices correlate with past, concurrent, and future operational performance measures. The results indicate that correlations with per-formance measures at all 3 times are both high and invariant, and that controlling for past or concurrent performance virtually eliminates the correlation of HR practices with future performance. Implications are discussed. The desire of human resource (HR) practitioners to demonstrate the value of what they do for the rest of the organization has a long history. Drucker (1954) referred to “personnel ” managers as constantly worrying about “their inability to prove that they are making a contribution to the enterprise, ” (p. 275). This has been echoed more recently by Tom Stewart, who described HR leaders as being “unable to describe their contribution to value added except in trendy, unquantifiable and wannabe terms...” (Stewart, 1996, p. 105). In response to these longstanding and repeated criticisms that HR does not add value to organizations, the past 10 years has seen a burgeoning of Correspondence and requests for reprints should be addressed to Patrick M. Wright