organization 2006 hesketh 677 99

Beyond Measuring the HumanResources Management–Organizational Performance Link:Applying Critical Realist Meta-Theory

Anthony HeskethLancaster University, UK

Steve FleetwoodLancaster University, UK

Abstract. One response to the possible outsourcing of the humanresource (HR) function is to turn to ‘science’ and seek to demonstrate anempirical association between HR practices and increased organizationalperformance. This paper critically examines the shortcomings of the‘scientific’ approach by first, reviewing the three distinctive versions ofresearch on the Human Resources Management (HRM)–Performance linkin an attempt to demonstrate their commitment to a common ‘scientific’meta-theory. Second, we use critical realism to demonstrate: (1) thattheoretical underdevelopment and lack of explanatory power are encour-aged by the use of an inappropriate ‘scientific’ meta-theory; (2) the possi-bility of meta-theorizing the causal connection between HRM andperformance without seeking statistical associations; and (3) how all this isin-keeping with Institutional theory. Finally, all of this is achieved byinserting evidence from interviews with HR professionals to demonstratenot only that they are sceptical of the ‘scientific’ approach, but also thatthey hold views of the world not dissimilar to the critical realist approachwe advocate. Key words. closed systems; event regularities; method-ology; ontology; powers; prediction; reflexive performance; science; tend-encies; tendential prediction

Volume 13(5): 677–699ISSN 1350–5084

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Something is definitely going on in human resources management(HRM). Recent debate over how best to identify and measure the keyhuman resource practices that generate increased organizational perform-ance has been raging, with contributions from government, practitionerbodies, the quality press, and consulting houses.1 Never before havepeople been ‘our most important asset’ as they are now. And yet despitethis, the outsourcing of HR functions enjoyed a record year in 2005 withfigures projected to rise even more sharply (Equa Terra, 2005; Davis,2003; Nelson Hall, 2005).

Faced with the threat of being outsourced, many HR professionals havepinned their hopes on convincing senior executives that the HR functionadds, as opposed to saps, value. Proof of this comes in the form ofresearch carried out by academics2 (and more recently HR consultants)seeking to empirically demonstrate the contribution made by HRM toorganizational performance—henceforth referred to as the HRM–Performance (HRM–P) link. There are, however, under-estimated andunrecognized problems for both HR professionals and empiricalresearchers. Let us briefly rehearse (some of) these problems, beforesubsequently addressing them in depth.

First, empirical evidence for the existence of an HRM–P link is incon-clusive. Second, the non-existence of an empirical association betweenHRM practices and organizational performance does not entail the non-existence of some kind of causal connection between them. It could bethe case that a causal connection exists, but the nature of this causality ismore complex than can be captured via the usual statistical techniques.If, as we believe, this is the case, then concluding that there is no causalconnection, simply because there is no empirical association is mislead-ing in the extreme. Third, even if convincing empirical evidence for theexistence of an HRM–P link is eventually found, a statistical associationin, and of itself, constitutes neither a theory nor an explanation.Although some of the more sophisticated empirical researchers (Guest,1997, 2001; Boselie et al., 2005) are aware of the lack of theory, even ifthey under-estimate the scale of the problem, the lack of explanationremains totally unrecognized.

These empirical and theoretical problems are caused, at least in part,by a reluctance to even consider the possibility that they might have theirroots in meta-theoretical problems.3 That is, these empirical and theoret-ical problems might be caused by the use of what is often referred to as a‘scientific’ approach (Boudreau and Ramstad, 1999: 343; Murphy andZandvakili, 2000: 93; Brown, 2004: 40) with its commitment to empiricalresearch techniques. Indeed, empirical researchers have tended to ignoremeta-theory altogether, strongly implying that theoretical problems willresolve themselves via more, and better, empirical work (Becker andGerhart, 1996; Boudreau and Ramstad, 1999; Guest, 1997, 2001;McMahan et al., 1999). We disagree, holding the view that although

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empirical research might be a useful starting point for understanding theHRM–P link, it should not be treated as an explanatory end game.Unfortunately, however, a great deal of this research does not proceedbeyond attempts to find an empirical association between HRM practicesand organizational performance.

Unhappy with the current state of affairs, we decided to adopt twostrands of inquiry. On the one hand, we decided to reflect deeply uponthe current meta-theoretical presuppositions underpinning empiricalresearch on the HRM–P link, to tease out exactly where the problemsmight lie. On the other hand, we decided to undertake empirical work toascertain what kind of meta-theoretical approaches HR managers actuallythink are appropriate for understanding the relationship between HRMpractices and the performance of their organizations and some of theinstitutional forces at work shaping these decisions.

The paper has three main sections. First, we briefly review the threedistinctive versions of research on the HRM–P link in an attempt todemonstrate their commitment to a common ‘scientific’ meta-theory.Second, we use critical realism to demonstrate: (1) that theoreticalunderdevelopment and lack of explanatory power are encouraged by theuse of an inappropriate ‘scientific’ meta-theory; (2) the possibility ofmeta-theorizing the causal connection between HRM and performancewithout seeking statistical associations; and (3) how our analysis is inkeeping with Institutional theory. In all three sections, we provideevidence from interviews with HR professionals to demonstrate not onlythat they are sceptical of the ‘scientific’ approach, but also that they(largely) hold views of the world not dissimilar to the critical realistapproach we advocate.4

Our empirical work is primarily based on over 70 interviews with HRdirectors and senior managers in over 30 organizations in the UK, Europeand the USA (Fleetwood and Hesketh, 2006). As will become clear below,central to our work on the HRM–P link is the critically realist notion of astructured or relational ontology [for an example of this in organizationalresearch settings, see Fairclough (2005)]. Access to the deeper realm ofunderlying causal mechanisms, structures, powers and tendenciesrequires a more discursively reflexive approach to data collection [e.g.Alvesson and Skolberg (2000)]. Our interviews followed a similar pat-tern, asking respondents to: (1) summarize their career histories andcurrent roles and (2) articulate what they understand about the nature ofthe link between HRM techniques and organizational performance; fol-lowed by (3) an exploration of the foundations on which their assump-tions of how HRM influences organizational performance rest (Fleetwoodand Hesketh, 2006).

Black Boxes, Russian Dolls and Rubik’s CubesResearch on the HRM–P link has a long history. Although authors such asWoodward (1965) addressed the issue four decades ago, many point to

Beyond Measuring the HRM–Organizational Performance LinkAnthony Hesketh and Steve Fleetwood

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the seminal papers of Osterman (1994), Pfeffer (1994) and especiallyHuselid (1995) as providing the solid foundations (cf. Paauwe, 2004:53–4). This ‘universalistic mode’ (Delery and Doty, 1996) proposes theadoption of ‘best practice’ or ‘high performance work systems’ which arenot only universally applicable and successful, but should also beevaluated or measured in terms of top-level organizational performance(e.g. market-based measures such as Tobin’s q or accounting measuressuch as gross rate of return on capital or GRATE), for which variousaccounting analyses can be imported and applied to the field of HRM.Prescribed HR practices differ, ranging from Pfeffer’s (1995) 13 inter-related practices for managing people, through Huselid’s (1995) highperformance work systems, to more recent attempts such as that ofEllinger et al. (2002) to relate learning concepts to organizational per-formance. No matter what variation we find in the independent variables,the dependent variables are nearly always the same, namely variations inthe publicly reported top-level financial performance of organizations.

Configurational theories differ from the assumptions held by universal-istic researchers insofar as an internal consistency between HRM prac-tices is viewed as essential to unlocking enhanced organizationalperformance (e.g. Delery and Doty, 1996). In many ways, the configura-tional approach is an extension of contingency theory, which advocatesthe utilization of different types of HR practices in accordance with thedifferent strategic positions adopted by organizations (e.g. Schuler andJackson, 1987). Nevertheless, the dependent variable of actual financialperformance is seen as the yardstick against which HR techniques,whether universalistic, configurational, contingent, vertical or horizon-tally integrated, etc., and their implementation are to be measured.

Whereas the universalistic mode is often described as the ‘black box’approach to examining the HRM–P link because of its examination of thelink between various ‘inputs’ (HR policies and practices) and ‘outputs’(profits, financial performance), the contingency mode’s contribution tothe HRM–P link is perhaps best represented by the metaphor of a Russiandoll in which the outer doll of enhanced organizational performance iscontingent on the ‘fitting together’ of the inner dolls of different HRpractices. The configuration mode is illustrated by the Rubik’s cubeanalogy wherein a shift in the strategic orientation of an organization(Schuler and Jackson use the examples of innovation, quality-enhancement, cost reduction, etc.) requires a concomitant shift in empha-sis on specific (if sometimes wholly different) HRM practices.5

Common Meta-Theory and Common Problems

The slight variations in these three approaches, and variations in thedependent and independent variables used, should not blind us to onevery important point: they all adopt the same ‘scientific’ approach,which can be styled as follows: HR (or high performance work) practicesand organizational performance are quantified using appropriate metrics

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and measurements, generating empirical proxies as data. Various statis-tical techniques (e.g. regression, analysis of variance, correlation, struc-tural equation modelling, factor analysis and so on) are then employed onthese data to test hypotheses, typically, to the effect that certain (bundlesof) HRM practices, under certain conditions, are associated with organi-zational performance.6

Whatever merits the ‘scientific’ approach possesses, it is vital that weexplicitly acknowledge one fundamental limitation: an empirical associa-tion between HRM practices and organizational performance does notconstitute an explanation of this association. A regression equation, forexample, even one with good predictive power, has no explanatorypower. Variations in the proxy measurements of HR do not explainvariations in the financial performance of organizations.

Although some researchers are perfectly aware of these limitations, andperhaps recognize the need for this ‘scientific’ approach to be usedalongside other methods (methodological pluralism, methodological tri-angulation, and so on), others may not be aware. Kinnie et al. (2005: 19),for example, refer to the ‘explanatory power of the models’ apparentlywithout even considering the possibility that regression models do notpossess such power. This is obviously a contentious issue, so let uselaborate a little.

In the lingua franca of statistics, to ‘explain’ is to use the independentvariables (often misleadingly referred to as ‘explanatory variables’) toaccount for some proportion of the variance in the dependent variable.This is, of course, a very specific way of using the term ‘explanation’ andin this lingua franca it is quite unobjectionable. But outside this linguafranca, it is problematic because it does not actually explain why theindependent variables account for some proportion of the variance in thedependent variable. However useful it might be to know that X1, X2, andX3 ‘explain’ 75% of the variance in Y, neither the equation itself, nor theempirical data that constitute the variables, give us any idea why this isthe case. There is more to a bone fide explanation than ‘explaining’ someproportion of the variance in a dependent variable (cf. Lipton, 1993;Ruben, 1992). There are, however, four more practical objections to theexclusive use of the ‘scientific’ approach in current research into theHRM–P link. Let us deal with each of these in turn.

First, as is now recognized by some empirical researchers, the data areinconclusive. Rather than provide a long list of references, we refer thereader to two recent surveys Wall and Wood (2005: 454) and Boselie et al.(2005: 81–2).

Second, the recommendations do not work in practice. This is evidentfrom the fact that scores of firms employing best-practice HRM tech-niques are not enjoying the differential in their performance used tounderscore the case for the scientific approach to the HRM–P link.Crucially, when stepping into the practical domain, many HR managers


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find little resonance between the ‘scientific’ claims surrounding statis-tical association and causality with their own organization’s everydaypraxis. This is a point we shall return to below when we present our ownempirical findings.

Third, HR practices that are associated with increased performance inone industry, occupation, location or time appear not to be associatedwith increased performance in other industries, occupations, locations ortimes. Indeed, to the best of our knowledge, none of the key empiricalstudies has been replicated, using the same model but new data from alater time period (Fleetwood and Hesketh, 2006). Following Sayer (2000),we have philosophical objections to the epistemological viability ofapparent variations in the capacity of HR to drive organizational perform-ance across different industrial sectors.

Finally, the social world is not only far more complex than this‘scientific’ approach presupposes, but HR managers also know it is farmore complex, and implicitly reject the meta-theoretical presuppositionsof the ‘scientific’ approach. If this were not the case, then HR managerswould be able to take any one of the scores of studies claiming to haveidentified a relationship between some bundle of HRM practices andperformance, perhaps in a similar industry, introduce this bundle, andexpect a similar increase in performance. That experience rarely lives upto such prediction raises important questions.

One such study often cited in defence of the ‘scientific’ approach’sacknowledgement of this complexity claims to have used ‘extensive fieldwork that revealed which HR policies differentiated mass and flexibleproduction systems most clearly’ (MacDuffie, 1995: 203). Crucially, theloss of social complexity that goes with the transformation of qualities toquantities as social phenomena are transformed into variables that facili-tate statistical manipulation, leads to an inevitable trade-off:

I selected for measurement only practices that could potentially be imple-mented in any plant in the international sample, thus excluding practicesthat are exclusively associated with one particular company or country.(MacDuffie, 1995: 203; emphasis added)

This operationalization of HR practices represents for us an unsat-isfactory trade-off in the analysis of the HRM–P link. This is emphaticallyrecognized by the extensive literature devoted to the significance ofunique organizational practices and (often intangible) resources repre-sented in the resource based view (Barney, 1991). Consequently, thecomplex organizational processes and practices thought crucial toenhanced performance might be overlooked in an attempt to find a statis-tical common denominator. But nor is it just a case of merely identifyingand then quantifying the right variables. Significant questions remain as towhether the ‘scientific’ approach reifies the significance of some (quantifi-able) variables at the expense of (unquantifiable) social practices at lowerlevels within organizations. We are not alone in this observation. In arecent review of the HRM–P literature, Pauwee (2004: 55) notes: ‘to date

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there is very little research that “peels back the onion” and describes theprocess through which HRM systems influence the principal intermedi-ate variables that ultimately affect firm performance’.

In sum, whatever the merits of using the ‘scientific’ approach to carryout research into the HRM–P link, it simply does not reach far enoughinside organizations to explain what is going on therein. Far from seeingthe pursuit of statistical associations as an ‘end game’, as it is oftenpresented in academic journals and (especially) the more generic pub-lications aimed at HR professionals, we interpret it as a point of depar-ture. At best, it tells us there is a connection to be explained and, at thispoint, the search for a deeper understanding of the relationship betweenHRM and organizational performance must begin. Indeed, a recent obser-vation by one of the leading researchers in the field (Paauwe, 2004: 36–7)has called for this very intellectual exercise, arguing for such develop-ment to be couched in terms of Institutional theory suggesting that ‘weneed a theory to assess the relationship between a set of HRM policiesand practices and to explore how these relate, interact, or are influencedby the ‘context’?’ To do this, however, we need to go beyond this‘scientific’ approach and its notion of causality as mere regularity orassociation. To build on the observations revealed via statistical analysis,we need to consider the contribution meta-theory can make to ourunderstanding of the link between HRM and organizational performance.And this brings us to critical realism.

Going Beyond ‘Science’: Critical Realist Meta-TheoryThis section sketches critical realist meta-theory to provide a way ofmeta-theorizing the connection between HRM and performance, withoutreducing this to statistical association, and to do so in ways that aretotally in keeping with Institutional theory.

Establishing the connection between critical realism and Institutionaltheory is difficult not only because there are many versions of Institution-alism, but also because critical realism, as a philosophy of science,inhabits a meta-theoretical domain, whereas Institutionalism inhabits atheoretical domain: the role of meta-theory is to interrogate the pre-suppositions of any theory. Nielsen (2001) provides an excellent over-view of the main Institutional theories or approaches (e.g. Americanneo-Institutionalism; evolutionary economics; new economic sociology;historical Institutionalism; the cognitive-institutional approach and newInstitutionalism in political science) before going on to demonstrate howfive of the following six approaches are compatible with criticalrealism—the latter being the ‘odd one out’ because of its commitment topositivism. He then summarizes the key theoretical assumptions of theseapproaches in four points which are shared by critical realists. First, theyfocus on the role of institutions (and social structures) such as habits,routines, and norms in the coordination of behaviour. Second, humanagency is seen as purposeful, or intendedly rational, endowed with some


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freedom to deliberate or choose in accordance with individual psychol-ogy rather than, on one hand, as irrational, automatic rule-followers ortotally encapsulated in an externally defined role or, on the other hand,rational in the sense of isolated maximizing ‘economic man’. Third, theyemphasize the constitutive importance of the cultural and cognitiveframework. Finally, they recognize the central and pervasive role ofpower and conflict.

One reason to doubt the affinity between critical realism and Institu-tionalism, is that critical realists tend not to use the term ‘institution’.This is, however, largely because they tend to favour the term ‘socialstructures’. This difference is largely semantic because there is generalagreement that institutions are a specific kind of social structure. ‘Institu-tions’ according to Hodgson, ‘are the kind of structures that matter mostin the social realm . . .’ (Hodgson, 2005: 2; see also Lawson, 2005). Allthis suggests that the critical realist meta-theory may well provide anappropriate meta-theoretical underpinning to Institutionalist theory. Thisraises the following question: how might Institutionalist theory utilizecritical realist meta-theory?

All theory (consciously and explicitly or unconsciously and implicitly)employs meta-theory. If a meta-theory is not consciously or explicitlyselected, then a meta-theory will be implicitly or unconsciously pre-supposed anyway. It seems entirely reasonable to suggest that appro-priate meta-theory should be carefully considered and selected such thatit is consistent with the theory rather than simply allow theory to beinformed by meta-theoretical happenchance. Indeed, Nielsen’s paperdemonstrates that errors creep into Institutionalist theory preciselybecause inappropriate meta-theory is implicitly or unconsciously pre-supposed. Let us consider an example closer to home.

Working within the Institutionalist tradition, Ramsay et al. (2000)consider the possibility that the enhanced organizational performanceassociated with high performance work systems is caused by workintensification, offloading of tasks, controls and increased job strain—something they refer to as the Labour Process model. The conclusion oftheir paper, however, runs into a contradiction, arguably, meta-theoreticalin nature. None of the models they test provide an adequate account ofthe outcomes of high performance work systems. Although they reject thepossibilities that the data are problematic because they are based on therespected WERS 98 data, and that the statistical models are problematicbecause they encapsulate established measures that have been testedpreviously, they overlook the possibility that this entire ‘scientific’approach is wanting. Indeed, they recognize that:

The statistical models of the relationships between employees responses toHPWS [high performance work systems] practices, employee response andorganizational outcome used in the analysis are perhaps too simplistic tocapture the complex reality of the implementation of the operation ofHPWS . . . It is quite plausible that outcomes flowing from managerial

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innovation are much less determinate than our models apprehend.(Ramsay et al., 2000: 521–20)7

We suggest that conscious application of critical realism would havesharpened their (existing) insights, and discouraged them from employ-ing meta-theoretical apparatus that they themselves doubt. If Institutionaltheory can benefit from the meta-theoretical clarity that critical realismbrings, what exactly is it that critical realism offers?

Critical RealismCritical realism is a meta-theory rooted in ontology. Critical realists havemade headway in recent years in developing a social ontology, namely aset of very abstract statements about the way the social world is (its beingif you like) and, from this, have derived methodological commitments.Let us start with ontology and work our way to methodology.

The social world consists of human agents and social structures—bywhich we mean institutions, mechanisms, resources, rules, conventions,habits, procedures, and so on. This has been discussed since the 1980s insocial theory under the agency–structure framework, although criticalrealists have done much to develop this framework recently (Archer, 1995;Stones, 2005). Notably, critical realists emphasize the transformationalnature of the social world, whereby agents draw upon social structures(etc.) and, in so doing, reproduce and transform these same structures.

As is now well known, critical realists make great play of open andclosed systems. Systems are defined as ‘closed’ when they are charac-terized by event regularities, and ‘open’ when they lack event regularity,where an event regularity is styled as: ‘whenever events x1, x2, . . . xn thenevent y’ or in stochastic form, ‘whenever events x1, x2, . . . xn on average,then event y on average’. Event regularities are also styled as: ‘y = f(x1 . . .xn) and form the basis upon which any mathematical or econometricspecification is derived. However, event regularities, and hence closedsystems, are extremely rare phenomena, especially in the social world.Presupposing closure when the social world appears to be open, there-fore, initiates a series of problems that we cannot go into here (cf.Lawson, 1997; Fleetwood, 2001). Does empirical research on the HRM–Plink presuppose a closed system? In a word, yes. To suggest, as theliterature overwhelmingly tries to, that some HRM practices are statis-tically associated with increased performance, is to assume regularityand hence closure.

Critical Realism at WorkIt is almost always the case that physical entities, such as informationtechnology, and social entities, such as organizations, unions, high per-formance work systems, and so on, exist as clusters of components thatendow them with powers. An organization consists of a cluster of socialstructures, institutions, mechanisms, rules, resources, conventions, hab-its procedures, etc., along with the human agents that activate them.


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Because the entity usually does whatever it does in virtue of the inter-action of the totality of causal components, we need a term to refer tothem as a whole. The term we use is a generative ensemble.

We can think of the firm as a generative ensemble that enables orcauses the production of goods and services. Or we can think of theworkplace, the shopfloor, the work-system or the team, as a complex webof interlocking generative ensembles, sub-configurations, sub-sub-configurations, and so on. Just-in-time production, for example, is possi-ble because the sub-configuration that enables inventory interlocks withthe sub-configuration that enables distribution within the plant. The sub-configuration that causes distribution within the plant interlocks with thesub-sub-configuration that consists of the maintenance of fork-lift trucks.Much depends upon the questions we are asking, and the level ofabstraction we are using. Certain business processes manifest themselvesas sub-configurations more readily than others. Rarely, however, do suchconfigurations, sub-configurations and sub-sub configurations lend them-selves to measurement. This complexity is routinely overlooked by theHRM–P literature that often utilizes simplistic and overarching HRstructures as proxies, thereby ignoring the influential and complexunderlying causal mechanisms at work in the social processes under-pinning such HR work practices.

From our interviews with senior HR managers and function directors(now totalling over 70), we found clear parallels between our notion ofgenerative ensemble with the ways in which practitioners understoodand conceptualized their day-to-day activities:

When I’m working on the implementation of [HR] processes I find myselfthinking about the orchestra analogy. You know, like a conductor. Theconductor plays no instrument and makes no sound, but without aconductor you’re just going to get a cacophony of noise rather thansomething which conforms to a score. Your [High Performance WorkSystems] are the score which describes, or denotes, what the thing shouldsound like in the end, and the implementation [of HR processes] is theconductor. And if you’re trying to evaluate different sections of theorchestra and how well do they work, the answer is it doesn’t all dependon the score. If you have a score that actually doesn’t have any brass in it,you can’t say the brass section is pretty crap because they’re not makingmuch noise. The score simply doesn’t call for that. When one is trying toevaluate the whole impact of HR one very much has to take into considera-tion the whole score. Some things are very much in the fray, and othersaren’t called for very much. You will bring in things in operations whichcan make a difference, and then afterwards the effect might be quitemuted. (HR Director; emphasis added)

PowersEntities (including humans and social structures) possess powers, that is,dispositions, capacities and potentials to cause certain things, but notothers. Gunpowder, for example, has the power to explode, but not to

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speak a language: humans have this power. Now powers are rathercomplex things. Powers may be possessed with or without being exer-cised and may be exercised with or without being actualized; hence, theitalicized section in the above interview extract. We would add to thisobservation some additional points.

First, a power is possessed by an entity in virtue of its internal make-up, and this power endures whether or not it is exercised or actualized,and therefore endures irrespective of any outcomes it generates. When apower endures in this sense, it can be said to act transfactually. Anemployee has the power to work effectively in the sense that she maywork in a highly productive, highly value-adding manner. Or she maynot. When exercised, certain HRM practices may have the power to fostercertain high value-adding behaviours. Or they may not. The point is thepower endures even if it remains unexercised and un-actualized. OneCEO, this time of a major consulting house, emphatically concurred withthis view:

I think the question you ask encapsulates the problem we face. If asceptical CEO needs to be convinced about our proposition that theperformance of their infrastructure can be improved, I’m frankly, notinterested. If they are seeking some proof of concept that is null untilproven, then I’m already on my way out of the door. I really have not gotthe time, patience, or inclination to go through that sort of meander downto Damascus, frankly. If you’re looking for a well articulated scientificmodel with evidence, then, unless you are prepared to listen to marketinghyperbole, you won’t find it.

Second, and following on from the previous point, a power exercised is apossessed power that has been triggered, and is generating an effect in anopen system. Due to interference from the effects of other exercisedpowers, however, we can never know a priori, what the outcome of anyparticular power will be. An exercised power may act transfactually.Consequently, it is not the existence of certain powers or structures ofaggregated powers often labelled as key HR practices in the HRM–Pliterature that cause enhanced performance. Rather, the actualization ofthese powers is itself contingent on other, underlying powers and struc-tures that may, or may not, be actualized at any particular time and/orplace. Understanding the processes through which certain HR practicesor strategies enable certain powers represents the Achilles heel of currentHRM–P literature, and, in many ways, represents the starting point in ourempirical analysis of HR’s role in explaining the performance of people,their teams and the organizations to which they belong.

Third, a power actualized is an exercised power generating its effectand not being deflected or counteracted by the effects of other exercisedpowers. An actualized power does not act transfactually but factually inthe sense that the power generates its effect.

Finally, people can have ‘personal powers’—a ‘reference to agents’subjective and reflexive formulation of personal projects’ (Archer, 2003: 5).


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Powers are possessed by workers in virtue of their biological, physio-logical, psychological and social make up—although it is important tonote that these levels are irreducible to one another so we cannot simplyreduce social behaviour to biology. Unlike most animals, humans do notjust execute genetically pre-programmed tasks; they conceive these tasksfirst—although there may be a complex and recursive process betweenconception and execution. The power of conception is of crucial impor-tance here because it consists of the powers of imagination, ingenuity andcreativity that conceived of the Pyramids, the Guggenheim, the cart, theMIR space station, surgical tools, nuclear weapons, and the HR businesspartner. These same powers of imagination, ingenuity and creativity arealso exercised in the conception of less grandiose endeavours such asfinding better ways of producing a rivet, writing a programme or engagingin a telephone conversation. HRM practices such as performance man-agement, retention, job design, and especially engagement, along withschemes to increase employee participation and empowered employees,are designed to unleash and harness the powers of imagination, inge-nuity, customer service and creativity that workers bring with them to thework place. If workers did not have these powers there would be no pointwhatsoever in even contemplating HRM practices. Indeed, the sub-title ofPfeffer’s (1994) book Unleashing the Power of the Workforce captures thepoint beautifully. The fact that HRM has not succeeded in unlockingworkers’ powers does not mean they do not exist: something could becounteracting these powers. Or, alternatively, these powers may wellhave been unleashed: that they—or their impact—cannot be statisticallycaptured does not preclude their existence.

Tendencies

The term ‘tendency’ refers to a force. Metaphorically speaking, a forcedrives, propels, pushes, thrusts, asserts pressure and so on. Perhaps themost important point to note about a tendency is that it refers not to anyoutcome or result of some acting force, such as a regularity or pattern inthe resulting flux of events, but to the force itself. A tendency should not,therefore, be (mis)understood as some kind of rough and ready eventregularity or law, nor as a stochastic regularity.8

Now, to write that a configuration has a tendency to x, does not meanthat it will x. In an open system, configurations do not exist in isolationfrom one other, rather there is a multiplicity of such configurations eachwith their own tendencies and these tendencies converge in some space–time location. The relation between configuration and tendency might becharacterized as follows. The configuration does not always bring aboutcertain effects, but it has a tendency to cause them. Hence, it acts transfac-tually. Configurations continue to cause the flux of events, irrespective ofthe conditions under which they are said to operate. We do not say of atransfactually acting configuration that it would bring about certain eventsif certain conditions prevail, or ceteris paribus. Rather, the configuration

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tends to cause certain events, period. Configurations continue to enable theflux of events irrespective of any events that ensue. A transfactually actingconfiguration does not depend for its action upon the patterns of eventsthat it causes: it continues to enable social processes, whether theensuing events are constantly or non-constantly conjoined.

Each configuration (and sub-configuration) generates tendencies andthese tendencies can counteract, and augment, one another in complexways. The sub-configuration that constitutes a workforce with the tend-ency to resist control, co-exists simultaneously with the sub-configuration that constitutes a management team with the tendency toassert control. The outcome, however, depends upon the relativestrengths of the tendencies. Notice, then, that it is the generative ensem-ble as a totality, and not any of its individual components that generatesthe powers and, therefore, the tendencies the generative ensemble has.Notice also that statistical analysis cannot deal with tendencies becauseit can only deal with phenomena that are actually manifesting theirgenerative powers, whence they can be observed in action. We can, forexample, statistically analyse the tendency of gunpowder to explode, butwe cannot statistically analyse the powers of imagination, ingenuity andcreativity possessed by a workforce.

In the following example, this HR director illustrates our point aboutthe interplay between powers and tendencies, their configurations, sub-configurations and sub-sub-configurations, while at the same time allud-ing to the transfactuality of HR’s capacity to work only when in the righthands and minds derived from experience. In short, it is not the actualinsertion of certain HR systems and structures, but understandingthrough experience and reflexivity how they work in light of the subtlecomplexities, ‘and processes by which societal expectations of appro-priate organizational action influence the structuring and behaviour oforganizations in given ways’ (Dacin, 1997: 48) that is crucial:

All of this stuff about High Performance Work Systems to my mind missesthe point. It’s a bit like taking a Formula 1 motorcar and asking somebodywith a conventional driving licence to race it round Silverstone. Theyknow that the car has gears, a clutch, a steering wheel and brakes, but thatperson has no idea about the capability of the car, its nuances and whatyou have to do in order to get the best out of that car. That is not to say thatthey will not be able to drive it around the track. But you have to knowwhat you’re doing with it, have the experience, and understand the wholeprocess of racing the car. There are all sorts of complications that you haveto bring into the equation. You have a team of mechanics to support you,they need to know when you’re coming in in order to prepare. [. . .] A lot ofHR is like bad racing car driving. They’ve got the kit but it doesn’t alwayswork because you have to know when to use some things and not others.It’s about experience, not textbooks telling you what to do. Everybodywants to isolate the ‘it’ and do something with ‘it’. It’s much more subtleand powerful at the same time. (HR Director)


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From Causality to Explanation—Reflexive PerformanceComplex causality refers to a situation where the cause of an event is notassumed simply to be the event(s) that preceded it (which would be somekind of simple causality), but rather is the entire conflux of interactingcausal phenomena. The causality of the lamp’s illumination, for example,is the nature of the glass, the gas, the filament, the wire, the switch, theplug, the electricity, as well as the finger that flicked the switch. None ofthese events in isolation causes light. Rather, it is their configuration in aparticular form that causes in a complex way their aggregated powers togenerate light.

Complex causality is connected to what we call robust explanation.Providing a history of a phenomenon, and hence explaining it, could beinterpreted to mean giving information about the underlying mechanismsand structures, along with (if we are dealing with social phenomena) thehuman agency that reproduces and transforms these mechanisms andstructures. That is, explanation could be based upon complex causality. Ifand when causality is complex, then explanation cannot be reducedmerely to giving information about a succession of events, but rather,requires information about the entire conflux of interacting causal phe-nomena beyond that captured even by sophisticated techniques utilizedin the multiple analysis of variance (MANOVA). Information about theentire conflux of interacting causal phenomena is necessary for a robustexplanation. Information about the nature of the glass, the gas, thefilament, the wire, the switch, the plug, the electricity, as well as thefinger that flicked the switch, all add to the richness of the explanationand are therefore not superfluous but absolutely necessary. There is littledoubt that most of us would recognize this information immediately asconstituting a very rich, or robust, explanation because it would (at thevery least go some way to) answering the question ‘Why?’.

People and HR processes, of course, do not behave in similar ways toglass, gas, filaments, wires, switches and electricity. So let us considerwhat would constitute a robust explanation. If and when a particularoutcome is complex in its enablement, then explanation is irreduciblemerely to giving information about a succession of events. A robustexplanation of the increase in, for example, the performance of any givenHR processes and their capacity to drive business performance requirestwo kinds of information. First, a robust explanation requires, what wemight call, hermeneutic information. That is, information relating to theway the relevant agents (i.e. stakeholders) interpret, understand, makesense of, the workplace and thereby initiate action. The following examplefrom our interviews sets these observations into institutional context:

That thing about numbers is quite interesting because they are not adifferentiator in their own right. All they are is an indicator that thesausage machine is churning out what it is supposed to be churning out.Once the numbers settle down, after the initial blips, we don’t even need tosee them. They don’t drive the performance of HR. [. . .] It’s much more

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detailed and complicated. So we come to measurement from a verydifferent perspective. (HR Director)

Second, a robust explanation requires information about a significant (butnot infinite) set of interacting and causal phenomena through whichagents initiate this action. This might, for example, include informationon the social, political, economic and spatial environment of the industryand/or the firm; the composition of the team; the experiences and wishesof individuals comprising the team; the nature of the new jobs, tasks andskills (if any); the relationship between team members, the line managersand corporate strategy; the nature of control in the firm; and the nature ofany synergies (or dis-synergies) created by the interaction of these ena-bling causal phenomena, and so on. The following provides an exampleof this from our interviews:

When I want to know, ‘Well, what do we actually in fact “do”?’ I have to liftup the stones and have a look underneath. Many in HR are almostexclusively reactive; put the structures in place and see what happens. Youcan’t just buy things or people in and help organizations through majorchange programmes. You have to work at it, to better understand what’s inthere in front of you. (HR Director)

Clearly, these examples are not exhaustive but they are indicative ofmany of the accounts we heard. Furthermore, all of the causal phenom-ena identified in the examples we provide could be broken down intotheir components as we try to provide more detailed information.9

Needless to say, a great deal of this information will be irreduciblyqualitative. All this information adds to the richness of the explanationand is therefore not superfluous but absolutely necessary. There is littledoubt that most of us would recognize this information immediately asconstituting a robust explanation because it would (at least to somedegree) answer the question ‘Why?’.

Explanation and Tendential PredictionBecause of the openness of social systems, events cannot be inductivelypredicted, or predicted as deductions from axioms, assumptions andlaws—as in the deductive method sketched above. But the social struc-tures, institutions, mechanisms, rules, resources, etc., that human agentsdraw upon in order to initiate action, can be retroduced and theiroperation uncovered and explained. Retroduction consists:

. . . in the movement, on the basis of analogy and metaphor amongst otherthings, from a conception of some phenomenon of interest to a conceptionof some totally different type of thing, mechanism, structure or conditionthat, at least in part, is responsible for the given phenomenon. If deductionis illustrated by the move from the general claim that ‘all ravens are black’to the particular inference that the next one seen will be black, andinduction by the move from the particular observation of numerous blackravens to the general claim that ‘all ravens are black’, retroductive orabductive reasoning is indicated by a move from the observation of


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numerous black ravens to a theory of a mechanism intrinsic . . . to ravenswhich disposes them to be black. (Lawson, 1997: 24)

For critical realists, then, retroduction replaces induction and deductionas modes of inference, and explanation replaces prediction as the keyobjective of science. To the extent that we can successfully retroduce tothe causal structures (etc.) that govern some observation (and there is nogain-saying the difficulty of this), we have a theory that explains thisobservation. To the extent we have a theory and an explanation, we havean understanding of the tendencies generated by these structures (etc.).To the extent that we understand these tendencies, we can make claimsabout how the structures (etc.) are likely to govern the actions of thehuman agents that draw upon them. We hesitate to call this a predictionbecause the term is now so entwined in scientistic discourse that it isalmost impossible to untangle it and give it another meaning. Nonethe-less, it is a prediction of some kind, albeit heavily qualified, and we callit tendential prediction.

How might this work in the case of Human Resource Management?10 Ifwe can successfully retroduce to the social structures (etc.) that, whendrawn upon by workers and managers, cause bundles of HR practices to(say) increase organizational performance, then we have a theory with anexplanation of organizational performance. Such a theory with an expla-nation would allow us to understand the tendencies generated whenworkers and managers engage with HR practices and social structures(etc.). If we understand these tendencies we can make tendential predic-tions. We might, for example, be able to understand the tendenciesgenerated by the exercise of human labour power to activate workers’powers for creative, imaginative, ingenious, self motivated and selfdirected action, as well as the countertendencies generated by the aliena-tion, exploitation and commodification of human labour power. Wemight therefore be able to assess the efficacy of tendencies and counter-tendencies, and make a tendential prediction about the likelihood ofspecific bundles of HR practices increasing organizational performance.This process involves what we refer to as reflexive performance.

Reflexive PerformanceAccording to one of the leading critical realists, Archer (2003), individ-uals often engage in a specific ‘agential enterprise’ which she refers to asa ‘project’. When deliberating over a project, agents engage in a process of‘reflexive determination’, which refers to the personal process under-taken by individuals in identifying the causal mechanisms linking struc-ture to their agency. What we call reflexive performance, involves agentsnot only identifying the structures, institutions, mechanisms, rules,resources, etc., deemed to enable or constrain wider organizationalperformance, but also constructing strategies to use them to pursue theirpersonal goals. No social structure (etc.) is constraining or causal toutcourt. Whether social structures enable or constrain depends upon the

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nature of the relationship between it and the individual drawing upon it.‘Whether or not their [i.e. structure’s] causal power is to constrain or toenable is realized, and for whom they constitute the constraints orcausalites, depends upon the nature of the relationship between themand agential projects’ (Archer, 2003: 8; original emphases).

Reflexive performance, affords two critical observations in examiningthe HRM–P link: namely, the transfactuality of HR practices and theirimpact upon wider organizational performance, and, second, the con-tingency, and hence variability, in the capacity of certain HR practices togenerate the outcomes expected. Let us deal with each of these in turn.In terms of transfactuality, open systems and lack of event regularitymeans that the structures and practices of high performance worksystems may generate enhanced organizational performance, or theymay not. This goes a long way to explaining the wide variations inorganizational performance of organizations with similar HR structures,processes and practices. In Archer’s critical realist language, we have torecognize that ‘it is essential to distinguish between the existence ofstructural properties and the exercise of their causal powers’ (Archer,2003: 7). This in turn relies on the reflexive determination of those HRprofessionals and other employees engaged in the processes thought to beperformance enhancing. Therefore, to predict outcome y as the directresult of implementing high performance work system x negates (or atleast fails to consider) the role of individuals in (not) adopting or aligningcertain prescribed HR processes and practices with their, and others’,agential projects.

For Archer, this process of explanation is about the interplay betweenthe subjective world of agents and the objective and independent worldof social structures and institutions. All this takes place in a processlabelled ‘discursive penetration’. Individuals, be they HR professionals,managers or other employees, must all diagnose their own situations,identify their own interests and align the situations in which they findthemselves in some way with their own agential projects. For Archer, atall three of these points, individuals are fallible in terms of misdiagnosisof their situations, the misidentification of their own interests and ofcourse the misjudgement of what they deem appropriate action. All theseprocesses require an internal conversation:

The answer to this is held to be ‘via the internal conversation’. This is themodality through which reflexivity towards self, society and the relation-ship between them is exercised. In itself it entails just such things asarticulating to ourselves where we are placed, ascertaining where ourinterests lie and adumbrating schemes of future action. (Archer, 2003: 9)

The ‘internal conversation’ of the HR directors we have presented abovereveals to us what they believe to be the case and it is causally effica-cious, at least to a degree, because their thinking is deemed to beefficacious—they have the power to implement practices they deemappropriate. The conversation then becomes one between what might be


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labelled self knowledge (what one knows and thinks), societal knowledge(knowing what others think), a stance (the adoption of a position of whatone wants to achieve) and the legitimacy of this agential project under-pinned by the accompanying explanations to justify one’s project tooneself. Here, at last, we move away from ‘scientific’ notions of causality(as event regularity) to the genuine interplay between subjective proper-ties (discursive penetration through the internal conversation) and objec-tive structures (organizational successes, failures, ‘good’ performance,‘bad’ performance, etc.). People, their diagnoses and their actions, then,are as influential and important for analysis, as the structures andinstitutions they necessarily engage with. That said, institutions and theirenvironments play a major role in shaping how the causal role of HR isperceived and explained. Moreover, even when individuals, and in thecase of the example below, very powerful individuals have one view ofhow the HRM–P link should be understood, institutional isomorphismtakes over:

I’m alarmed at the time devoted to financials by HR. [. . .] There aremeasures that we are immersed in, dissecting every dollar for the CEOwhose focus is on the score and on the numbers. Nothing else here appearsto matter. (HR Director)

In sum, critical realism provides us with three meta-theoretical insights.First, it provides us with a sophisticated understanding of the limitationsof the ‘scientific’ approach, and therefore sound reasons to move beyondit. Second, it provides us with one possible alternative, namely, thecausal-explanatory method—a method more suited to the openness of thesocial world in general, and one identified by Institutional theorists inparticular. Third, it provides us with a notion of reflexive performancewhere we seek to identify the enabling causal configurations at work,through the discursive penetration of HR professionals’ internal con-versations. Understanding the underlying processes which enable orconstrain certain processes is far more important than the adoption ofsome form of scientific thinking in which outcome y is guaranteedthrough the implementation of x.

ConclusionAlthough the ‘scientific’ approach, with its commitment to empiricalresearch techniques, might be a useful starting point for understandingthe HRM–P link, it is currently treated as the end game. We suggest thatcritical realism, by offering a more fruitful meta-theory, can play asignificant part in developing an understanding to the causal role playedby HR in organizational performance. But we do not live in a socialvacuum; this much has been revealed to us in our ongoing work with HRdirectors, who may well (implicitly) subscribe to much of the meta-theory we propose here, but have to implement it in the real-worldinstitutions in which our research took place. It is for this reason that we

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leave the final word to one of our respondents, Chief Operating Officerand Vice President of HR of one of the world’s largest financial houses:

HR plays, or I should say, HR should play a fundamental role in helpingthe organization achieve it’s mission. I’ve always said, you know, I got thequestions when I announced I was moving into HR, ‘Carlos, wait a second,what are you doing? Have you lost your marbles going into HR?’ Myresponse to this was, ‘Guys, I’m moving into the most important functionof the bank’, and they all laughed. For me it’s very simple, what drivesbusiness performance? It’s all about people, right? And who’s focused onpeople? HR. [. . .] The challenge is finding the linkage [between HRM andperformance] and for this you need to move to the next level of under-standing what’s going on.

Notes1 Accenture (2004); Bukowitz et al. (2004); Donkin (2002, 2003, 2004);

Kingsmill (2003); Overell (2002); PricewaterhouseCoopers (2003); Saratoga(2005); Thomas et al. (2003); Witzel (2004); Wright (2001); Watson Wyatt(2001/2: 5 and 1).

2 Rather than provide the usual (long) list of references, we simply point thereader to the survey by Wall and Wood (2005) of the 25 most commonly citedarticles that appeared in ‘reputable’ journals.

3 We use ‘meta-theory’ as a portmanteau term to refer to philosophy of science,ontology, epistemology, methodology, causality and research techniques. Fora discussion in the HR context, see Pauwee (2004).

4 For an introduction to critical realism, see Ackroyd and Fleetwood (2000);Archer et al. (1998); Carter and New (2004); Danermark et al. (1997);Fleetwood and Ackroyd (2004); Lawson (1997, 2003); Reed (2001); and Sayer(1994, 2000). Several other writers in the Institutionalist tradition have madeuse of critical realism without feeling the need to elaborate upon it (e.g.Delbridge, 2000: 14–9; Beynon et al., 2002: 34–6).

5 We acknowledge that some researchers may not find these summariessatisfactory. Indeed, we refer to these perspectives only because researchersdeploy them to represent the different schools of thought within the HRM–Plink field of research they identify with. An evaluation of their adequacy islong overdue and, in many ways, our paper represents the initiation of thisprocess.

6 The preoccupation with quantitative analysis is demonstrated by Hooblerand Brown Johnston (2005: 668) and Boselie et al. (2005: 70).

7 Even leading Institutionalists Powell and DiMaggio (1991) find it difficult tobreak entirely with the ‘scientific’ approach. This is exemplified by theirdesire to seek inductively based predictions.

8 For an elaboration of tendencies, see Fleetwood (2001).9 Although the list of what could, in principle, be included in a robust

explanation could expand to include everything all the way back to the bigbang, in practice, social scientists usually avoid this problem by making useof abstraction (i.e. making judgements about which factors to include andexclude). Sometimes researchers get it wrong. This problem is no differentthan deciding upon which variables to include and exclude (cf. Runde,1998).


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10 This sketch is, of course, at a very high level of abstraction. The point is toillustrate how we might go about using the meta-theoretical concepts knownto critical realism to generate a tendential prediction.

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Anthony Hesketh teaches HR in the Management School at Lancaster University. Hisresearch focuses on capturing the impact of transformational outsourcing onorganizational performance. Recent books include The Mismanagement of Talent(Oxford University Press, 2004) with Phil Brown and Understanding the Perform-ance of HR (Cambridge University Press, 2006) with Steve Fleetwood. He is theDirector of the new Centre for Performance-Led HR at Lancaster. Address:Department of Management Learning, Lancaster University Management School,Lancaster LA1 4YX, UK. [email: [email protected]]

Steve Fleetwood teaches employment relations and HRM at undergraduate and post-graduate levels. His interests are in work, labour and employment, Marxistpolitical economy, labour markets and philosophy of science, especially criticalrealism. His major publications include: Hayek’s Political Economy, the SocioEconomics of Order (Routledge, 1999); Critical Realism in Economics: Develop-ment and Debate (Routledge, 1999); Critical Realist Applications in Organis-ation and Management Studies (Routledge, 2004) with Stephen Ackroyd;Critical Realism and Marxism (Routledge, 2002) with Andrew Brown and JohnRoberts; and Realist Perspectives on Organisation and Management (Routledge,2000) with Stephen Ackroyd. Address: Department of Organisations, Work &Technology, Lancaster University Management School, Lancaster LA1 4YX, UK.[email: [email protected]]


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