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SHRM Foundation Research

     

The Impact of HR Practices on Organizational Social Performance

Funded: June 2005  Completed: January 2008 

Sandra Rothenberg, Ph.D., Saunders College of Business, Rochester Institute of Technology
Clyde Eirikur Hull, Ph.D., Saunders College of Business, Rochester Institute of Technology

Executive Summary
Many large firms are responding to increased legal, social and environmental pressures by measuring and reporting their performance not just in terms of financial performance, but also in terms of social performance.  In the environmental arena, for example, astronomical growth in legislation related to environmental issues, increases in waste disposal costs, decreased availability of raw materials, and shifts in customer preferences have dramatically increased interest in, and pressure for, environmentally conscious business.  Further, there is evidence that increasing corporate social performance can lead to improved financial performance, increased operational efficiency, reduced costs, and fewer legal conflicts. 

A key concern for corporations has been how to improve social performance without compromising efforts needed to remain competitive in the global market place, with its constant pressure to produce more efficiently, with superior quality, and lower costs. 

Sandra Rothenberg and Clyde Eirikur Hull examined the relationship between effective HR practices and social performance to understand if practices that are good for the business are also good for its social performance. 

KEY FINDINGS AND IMPLICATIONS FOR PRACTICE

  • Good human resource practices are a positive driver of social performance. 
    • The same HR practices that help the corporation’s financial performance also help bolster social performance.
  • Other predictors of corporate social performance were found.
    • Corporations that have greater research and development and advertising intensity are more likely to have high social performance.
    • Larger corporations, in terms of number of employees, perform more poorly on social performance measures. 
    • Human resource management has the largest effect on corporate social performance.

 The findings suggest:

  • Managers concerned with corporate social performance need to consider a broad range of proactive human resource strategies.
  • Having a strong human resource management program is enough to bolster a firm’s social performance, even if the human resources program does not specifically address environmental and social issues.

Study Methods
Using corporate social performance measurements of the firm Kinder, Lydenberg, and Domini, the researchers examined the relationships between human resource practices and social performance (e.g., community involvement, environmental impact) in a sample of 171 corporations.  In doing so, they controlled for other variables that might be related to corporate social performance, such as firm size, total sales, and industry. 

Download the full research report. (in pdf)