cognitive ability tests, biodata, and the evaluation of recruiting sources) had higher
levels of overall performance, annual proWt, and growth in proWt. Huselid ( 1995 )
reported small (<. 10 ) correlations between diVerent HR functions and corporate
Wnancial performance, and a set of similar studies followed shortly after (Delaney
and Huselid 1996 ; Delery and Doty 1996 ; Huselid et al. 1997 ). Wright and Boswell
( 2002 ) have provided an informative review of this work. In more recent and more
sophisticated work, Hitt et al. ( 2001 ) and Batt ( 2002 ) examined the degree to which
the performance of lawWrms, as indexed by the ratio of net income to totalWrm
revenue, was inXuenced by various aspects of human capital. They found a
curvilinear relationship between human capital and performance reXecting the
fact that the early expenses associated with capturing the best talent only paid oV
later in theWrm’s history. They also reported an interaction between human capital
and strategy, as reXected in service and geographic diversiWcation. Batt ( 2002 )
found that quit rates were lower and sales growth measures were higher in
telephone call centers that emphasized high skills, employee participation, teams,
high pay, and security.
It is not hard to criticize the methodological rigor of these studies as some have
done (Boxall and Purcell 2000 ; Wright et al. 2001 b). Senior-level personnel usually
provide responses to single-item measures of HR functioning, sometimes about
issues of which they could not be well informed. Questions are often superWcial,
perhaps resulting from an eVort to keep survey instruments short and maximize
return rates. Wright et al. ( 2001 b) point out that these measures cannot possibly be
very reliable; this lack of reliability may be one reason why the relationship with
Wrm outcomes is often so very low.
Even with the potential limitations of the database on the relationships between
HR functions andWrm performance, there seems to be consensus on several issues.
First, it is not productive to consider HR functions or human capital in isolation of
other aspects of the organization or even of the society in which the organization
functions. Most representative of this position is the work of Lepak and Snell
( 2002 ) who describe conWgurations of HR activities that are most often associated
with particular types of employment modes (i.e. knowledge-based, job-based,
contract work, and alliance or partnerships). Second, successful organizations, or
systems, must have human capital (knowledge, skills, and abilities, or KSAs), the
social capital (internal and external relationships), and organizational capital
(processes, technologies, and databases) to be successful. Firms must have the
KSAs, but also develop practices that motivate people. This resource-based view
(Wright et al. 2001 a) and a more theoretical view ofWrm performance, strategy, and
the role of human resources appear to be the direction in which this area of study is
now headed. Finally, Wright et al. ( 2005 ) show that HR practices are strongly
related to future performance as well as past performance. ThisWnding challenges
the prevailing assumption that HR practices cause organizational performance
rather than the reverse, or that both are caused by some external variable(s).
304 neal schmitt and brian kim