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The Differentiated Workforce
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The HR Scorecard

In the face of dramatically changing competitive environments, organizations have undergone enormous changes, including a new emphasis on entrepreneurial activity, innovation, rapid response to market demands, and increased attention to quality. Many of the traditional strategic levers (such as economies of scale and proprietary technology), while still of value, cannot sustain competitive advantage and above average profitability as they have in the past. Within this context, the role of the workforce (and the HR management policies and systems that support it) as a potential source of competitive advantage has become an important topic in the fields of human resource (HR) management, strategy, and industrial and organizational psychology. An increasing body of literature argues that the adoption of what have come to be known as High Performance Work Systems or HPWS, including comprehensive employee recruitment and selection procedures, incentive compensation and performance management systems, and extensive employee involvement and training can improve the knowledge, skills, and abilities of the firm’s current and potential employees, increase motivation, reduce shirking, and enhance retention of quality employees while encouraging non-performers to leave the firm.

In both this largely theoretical literature and the emerging conventional wisdom, the implication is that organizational HR management systems can, if properly configured, provide a direct and economically significant contribution to firm performance. The presumption is that more effective systems of HR management practices, which simultaneously exploit the potential for complementarities or synergies among such practices and forge a link with the firm’s competitive strategy, are sources of sustainable competitive advantage. Such systems are also thought to afford the potential for mutual gains for shareholders and employees through access to enhanced wages, skill enhancement, and job security. Unfortunately, until recently there was very little empirical evidence to support such a belief, as extant empirical research has largely focused on individual HR management practices to the exclusion of the firm’s overall HR management “system.”

Informed by one of the first large scale, systematic and longitudinal data collection efforts on this topic, Dr. Huselid’s program of research has focused on increasing our academic and practical understanding in two broad areas: 1) Establishing the HR-firm performance relationship, and 2) Improving the practice of HR management through the development of balanced measurement systems to reflect the contribution of the workforce, workforce management systems, and the HR management function to business success.

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