Human resource management and business performance measurement

The purpose of this paper is to review the research into the relationship between human resource management (HRM) and business performance. The paper examines the change of the HR function into HRM taking on its current strategic role. Recent work on the links between HRM and business performance is reviewed highlighting the conclusion that while the links are not disputed by researchers using a variety of approaches, the ability to characterize definitive causal links has proved almost impossible. The techniques and resource‐based approach of intellectual capital (IC) may provide the key to quantifying the links but again, work to date has proved that it may not be possible to clearly separate HRM from other management actions to quantify the effects of HRM. A solution based on the IC approach involving rigorous measurement is suggested.