 The majority of empirical studies on the HRM-performance link report a positive story. The costs associated with the productivity rise due to high performance work practices (HPWP) have been largely neglected. The purpose of this study is to develop a conceptual framework that maps both the value-enhancing and cost-raising impact of HPWP. In addition, we want to pronounce upon their overall effect on financial performance. To test our model, we rely on a sample of small businesses. Understanding both performance and cost-related effects of the implementation of HPWP is particularly valuable for small businesses since they often lack financial resources to implement HPWP and benefit less from economies of scale compared to their larger counterparts. Study results indicate that although greater use of HPWP is associated with increased productivity, this effect is offset by increased labour costs. However, we find an overall positive effect of HPWP on firm profitability.

Attempts to explore empirically the link between HRM and firm performance are numerous. Yet, research on this link remains restricted to large companies. Little is known about the extent to which the existing results extend to small businesses. The purpose of the present study is to develop and test a conceptual framework linking HRM to financial performance that fits small businesses. The central question is whether the development of an intensive HRM is profitable for smaller organizations. For the development and optimization of the conceptual framework, we rely on human capital theory and bankruptcy prediction models. Using structural equation modeling, we study the mediating effect of voluntary turnover and productivity on the relationship between HRM intensity and one year lagged financial performance. The results show both productivity and profitability enhancing effects as well as a cost increasing impact of HRM intensity. Copyright Springer 2006financial performance, HRM, productivity, small business management, voluntary turnover, C39, M50, M51, M52, M53,

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Purpose -The debate on human resource (HR) outsourcing is polarised. HR outsourcing is seen as an opportunity for the HR function by some and as a threat by others. The first view suggests that HR outsourcing is an instrument creating time for HR to become a strategic partner. The second view considers HR outsourcing as a cost-cutting instrument gradually reducing HR staff. The purpose of this study is to examine whether HR outsourcing is a manifestation of a strategic HR focus, a cost-cutting HR focus or both. Design/methodology/approach -The sample is obtained from an economy-wide, cross-sectional survey. The data cover 1,264 organisations with ten employees or more. Findings -Results indicate that organisations with a strong focus on HR cost-cutting do not outsource more than organisations with a weaker focus on HR cost-cutting. The analyses show a positive relationship between a strong focus on strategic human resource management (HRM) and the level of HR outsourcing. Research limitations/implications -First, this study examines the breadth of HR outsourcing. Further research might consider the depth of HR outsourcing. Second, as results are based on cross-sectional data we cannot draw causal inferences. Finally, future research might focus on the impact of HR outsourcing on the organisation of the HR function and internal HR customer satisfaction. Practical implications -HR outsourcing empowers the HR department. It frees up HR professionals to focus on strategic HRM. Originality/value -HR outsourcing has been heavily debated. Yet, empirical research into the impact on the HR function is extremely limited. This study helps to fill this gap.

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