Living in a material world : coming to terms with the realities of financial analysis in the HRM-performance link

Hesketh, Anthony (2013) Living in a material world : coming to terms with the realities of financial analysis in the HRM-performance link. In: EIASM Strategic Human Resources Management, 2013-04-15 - 2013-04-16. (Unpublished)

Abstract

The best science on the table indicates investment in people can account for less than five percent of the variation in performance between companies. Given such a low rate of return from what typically represents between 40 – 80 percent of operating costs, might it not make sense to focus attention on what is driving the other 95 percent of Delta? Are we even measuring the right things on either side of the equations we are building to explore the relationship between HR and organizational performance? Or are the techniques currently in vogue better seen as the dear old family dog nobody wishes to see put down, even though such a course of action is long overdue? This paper is divided in to four sections. The first asks what might Michel Foucault have made of our debate over the statistical relationship between strategic human resource management and performance? On the one hand he would certainly have applauded an attempt to trace the progress of discovery and an analysis of the internal economies of different theories at work in our field. He would also have been in favour of an archaeological analysis of the various scientific representations or products of knowledge in their specific locus. He would, no doubt, also have be keen to point out that our historical analysis of such domains ought not to merely focus on knowing our subject but rather presenting a theory of discursive practice. Foucault would surely have pursued the question of how far such knowledge domains might actually represent as opposed to constitute the financial happenings within the business world which we seek to understand. Second, following the above, there is an element of the HRM-Performance knowledge domains being captured by their own discourse, leading to various methodological pressure points (see Hesketh and Fleetwood, 2006; Fleetwood and Hesketh, 2006; Fleetwood and Hesketh, 2008; Fleetwood & Hesketh, 2010 for a discussion). A second departure point, therefore, revolves around how far our understanding of HR’s role in unlocking financial performance can develop by simply doing more empirical work with the same ontological, epistemological and meta-theoretical assumptions imported from a largely “scientisitic” meta-theory. Third, examining recent work reveals the current cumulative state of knowledge domains in the field belong to the same logical song of predictive science, albeit with minor variations, hence Fleetwood & Hesketh’s (2010) identification of the Russian Dolls, Black Box, Rubik’s Cube and Kaleidoscopic schools of thought within the HRM-Performance field. That they should all be clustered closely together does not constitute their epistemological justification but reveals particular orders of discourse within the management research community. Academic researchers in our field, as in others, clearly hunt in packs. But safety does not come from numbers, and I mean this both in the plural and quantitative form! A third departure point, therefore, revolves around how we as a community of scholars might breakout of our current methodological approaches to engage with alternative ontologies in order to create new perspectives on performance in general and “the people contribution” in particular? Finally, to the future, the current meta-theoretical weaknesses of the HRM-Performance knowledge domains of the past are unlikely to be solved by the same thinking that contributed to their creation. In seeking to avoid the sins of our (predictive) fathers we need then to address a final departure point: what might a new paradigm of performance look like? For example, will it be one that recognizes that there is room for financial as opposed to quasi-financial analysis? Must we acknowledge, and thus accommodate, that organizational performance is not a predictive but largely a retrospective, hence retroductive, form of analysis through the rear-view mirror of financial reporting? Should we discard the dummy variables we use as a suitable straw man for the complexity and intangible assets comprising the remaining financial value of the organizations we seek to better understand, manage and lead? And what might we replace them with? How might practitioners react to, and crucially, deploy our new offerings in their activities?