Gerhart el al (1998) argue that while studies have shown a strong link between human resources strategy and organizational outcomes, these studies are often subject to different forms of measurement error. In future, measurement methods can be reformed and improved in order to provide better information with respect to the impact that human resources departments are having on the firm.
While prior studies relied on individual assessment of HR activities, if firmwide HR practices can be quantified, or explained in a thorough manner, then this would reduce measurement error. This requires the HRE to set strategy based on quantifiable inputs as well as quantifiable outputs. If this happens, then the measures used in the determination of HR's effectiveness can be easier to draw. They will be more accurate and more objective, leading to better conclusions.
Additionally, the prior studies typically built hypotheses after the fact, and then tested them. The HRE should be basing on its decisions on hypotheses about the firm's response to its strategies....
By creating hypotheses in advance, the HRE is better equipped to understand if the results of its actions are the intended results. The outputs both with respect to HRE outputs and firm outputs can be compared with the expected outputs. At present, there are no expected outputs against which to compare actual outputs. The result of having clear, quantifiable inputs and hypotheses at the outset of the strategic HR process would be to provide better information to HR managers about the effectiveness of their strategies.
B. Ramlall's (2002) insights show that firms typically do not measure the effectiveness of HR practices. In order to remedy this, the reasons why firms fail to do this must be understood. There are a number of possible explanations, and for most firms the reason likely relates to a combination of factors. Historically, HR was not viewed by senior management as having a direct impact on firm performance, and that stereotype may still exist in some firms. Even HR departments may sometimes still take this view. Ramlall…
