HRM POLICIES AND FINANCIAL OUTCOMES: A STRATEGIC INTEGRATION PERSPECTIVE

The concept of Human Resource Management (HRM) policies is becoming a widely accepted strategy tool with high potential of determining financial results of an organization. Going beyond their conventional administrative aspect, HRM practices, which are recruitment and selection, training and development, performance management and compensation systems are the defining factor in determining the productivity cost and long-term profitability. This paper discusses the connection between HRM policies and financial performance with strategic integration in perspective with the alignment of human resource strategies and financial goals. The paper makes use of the Resource-Based View (Barney, 1991) and Strategic Human Resource Management models (Wright and McMahan, 1992) to synthesize the already available literature on the issue to establish the main mechanisms in which HRM helps business to achieve financial success. This analysis has shown that organizations that have integrated HR-finance strategies experience high operational efficiency, less employee turnover, high innovation, and competitive advantage. Moreover, the research indicates that the HRM policy effectiveness depends on its alignment to the organizational strategy, and external market environment. The findings provide a pressing need to treat human capital as a strategic resource and suggest organizations to enhance the collaboration between HR and finance functions to perform sustainably in terms of the financial performance.