The findings advance the debate about the link between HR (human resources) practices and financial performance and are important in the context of the policy bid to identify those factors that make for increased productivity. They are also "fairly positive for HR management when attitudes within British business are still often downbeat and implementation of people management practices across the economy is still limited" said Professor Guest.
Professor David Guest, who will be speaking to the CIPD (Chartered Institute of Personnel and Development) conference in Harrogate on 24-26 October on HR management and performance, will present interim findings from the research that is based on the most comprehensive study to date of how companies apply people management. The survey covered a wide range of manufacturing companies, and, critically, the much larger service sector, where the link between HR practices and performance is revealed to be weaker.
The main findings confirm that financial performance, as defined by profit per employee, is enhanced where HR practices are in place, in manufacturing the association between performance and HR practices intensifies as more practices are implemented.
The association is not apparent, however, when HR practices are evaluated in terms of the cruder measure of sales per employee. Companies in the service sector demonstrate a much weaker association than in manufacturing but the strongest and most surprisingly consistent association between profit and people management is provided by companies which employ a specialist in personnel relations (in many smaller companies this is not always the case). There are many possible explanations for this, one being that the presence of the specialist indicates that management is more concerned for issues surrounding people management. "This finding could give a fillip to champions of HR, especially given the low esteem in which HR is frequently held by senior executives, often including HR executives themselves as revealed in the second part of the report."
The research was carried out in two parts: first, a survey of managers responsible for HR management and chief executives was matched with sales and financial data from Dun and Bradstreet for 409 organisations, of varying sizes; second, a survey of 16 organisations - public and private or partnership - in which three directors from each organisation were interviewed on how they view people management and its relation to business performance. The directors included the chief executive, HR director and another board level director. The second part of the research was funded by CIPD. This survey found that at least half of the executives thought that 'progressive people management' is not embraced as a priority for their organisation in spite of the widespread consensus that "people are our most important asset".
HR management practices were divided into nine groups for the purpose of linking them with financial and sales performance: recruitment and selection; training and development; appraisal; financial flexibility; employment security, single status and harmonisation; two-way communication; job design; and quality and team-working.
For further information, contact Professor David Guest, Tel: 020-7848-3723. Email david.guest@kcl.ac.uk
Or contact Lesley Lilley or Karen Emerton in ESRC External Relations on 01793-413119 or 413122.
NOTES TO EDITORS
1. The ESRC is the UK’s largest funding agency for research and postgraduate training relating to social and economic issues. It has a track record of providing high-quality, relevant research to business, the public sector and government. The ESRC invests more than £46 million every year in social science research. At any time, its range of funding schemes may be supporting 2,000 researchers within academic institutions and research policy institutes. It also funds postgraduate training within the social sciences, thereby nurturing the researchers of tomorrow. The ESRC website address is http://www.esrc.ac.uk.
2. REGARD is the ESRC’s database of research. It provides a key source of information on ESRC social science research awards and all associated publications and products. The website can be found at http://www.regard.ac.uk
3. The Chartered Institute of Personnel and Development has over 110,000 members and is the leading professional body for those involved in the management and development of people.
4. David Guest will be presenting the findings of the research at The CIPD’s National Conference and Exhibition ‘People Mean Business’ which takes place at the Harrogate International Centre from 24-26 October 2001.
5. For conference press enquiries, please contact Nicola Pierce/ Judith Cowan/Gerwyn Davies, tel 020 8263 3840/3232/3365 or Email: n.pierce@cipd.co.uk