QUESTION
Without implementing HRM theories and best practices organizations would not achieve their
desired goals and objectives. using class information and any other sources, discuss this statement
giving relevant examples.
Introduction
Human resource management (HRM) is a critical field of study, well-recognized, and high-value activity.
HRM is the effective and efficient use of workers to accomplish the organization's objectives, and it is
about handling coworkers, being the human side of business administration with strategies, practices, laws
and processes that influence the organization's workers (Arulrajah & Opatha, 2016, p. 153).
A theory is a collection of interrelated concepts, factors, interpretations and premises which presents a
systematic view of phenomena by defining the relationship between variables in order to explain a natural
phenomenon.
Explained below, are the Human Resource theories that organizations implement to achieve their
goals and objectives and reasons why they do so:
Organization Behavior Theory
The study of organizational behavior (OB) is applied to HRM functions and its related subjects helps us
understand what people in organizational environments think, feel and do. This knowledge helps to
anticipate, recognize and monitor organizational events for HR and, realistically all employees.
Organizational behavior study includes research areas dedicated to improving performance at work,
increasing job stability, fostering creativity, and fostering leadership. A focus on organizational behavior
helps to explain why certain different behaviors impact workers ' efficiency and discretionary effort, as
well as how to consider and forecast the effects of different policies on managing human resources (Pfeffer,
2007, p.126-127).
Motivation Theory
Motivation is a way to create a high amount of passion in order to achieve organizational goals, and this
condition is addressed by fulfilling certain individual needs. As Haque, Haque and Islam (2014) stated that
managers within businesses or organizations are largely responsible for ensuring that the activities or roles
are conducted in the right way by workers. To accomplish that, these HRM must guarantee that they have
a professional team of workers to hire the best staff capable of doing the job. This theory helps

organizations to understand that optimizing the productivity of the employees, the employee needs to be
motivated enough. At this level, one must understand human nature better understand how motivation can
impact on the performance of the employee. To achieve this goal, it is important to combine the correct
motivational resources with successful management and leadership in as much as motivation impacts on
employee performance (Haque, Haque & Islam, 2014).
AMO theory (Ability, motivation and opportunity) to participate
According to AMO theory the components of Ability, Motivation, and Opportunity are the three-
independent work-system elements that form employee characteristics and eventually lead to
organizational success. Through these three components, organizational interests are best served due to the
fact that AMO theory paves the way for line managers to use effective approaches that result in employee
motivation using HR policies and practices (Bos-Nehles, Riemsdijk, & Looise, 2013, p. 3). This theory
helps organizations to know those practices and policies that HR undertakes to ensure that employees have
or gain the required skills, knowledge and ability to perform their tasks with minimum supervision as
Yahya, Tan and Tay (2017) states that ability-enhancing HRM practices are the practices that increase the
employee’s abilities and competencies to achieve organizational goals.
Human Capital Theory:
Human capital is an illustration of people’s investment in themselves, in other word in their skills, that
eventually increases their economic productivity. Their theory is based on the idea that human capital leads
to creativity which eventually results in receiving higher personal income. This theory’s supporters believe
that educated people are productive people meaning people who are educated, earn higher personal
income than the rest of the population. “Human capital theory rests on the assumption that formal
education is highly instrumental and even necessary to increase production capacity of a population”
(Olanyan & Okemakinde, 2008, p. 479). Human capital theorists claim that productivity and efficiency of
employees increases by education through raising the level of cognitive stock of economically productive
human ability that is an outcome of innate capability and investment in human beings.
Resource-based Theory
The resource-based view is applied as a theoretical foundation in HRM that is based on the assumptions
that firm resource distributed heterogeneously and remained stable over time. A firm’s resources include
materials, skills, organizational processes and systems, plus information and data of the organization. This
theory ties HRM with competitive advantage generation through focusing on fostering the internal
resources that the organization owns which most probably are unique and special to the firm, in different

words no two organizations have the same exact resources, either tangible or intangible. “If resources and
capabilities of a firm are mixed and deployed in a proper way, they can create competitive advantage for
the firm.
Institution theory
Institution theory suggests that the environment inside the organization has a direct impact on formal
organizational structure development. The organizational environment features such as cultural elements,
symbols, normative beliefs, and other shape institutional structure. Through the Institutional theory we get
to know the logic of organizational fields and organizational norms and argue that after conforming these
norms, organizations become optimal and prolong their survival by putting these norms into practice
finally grantees organizational survival.
Transaction Cost Theory
Transaction cost theory is one of the important organizational theories for the analysis strategy and
organizational issue and recently it has been applied to the HRM functions for controlling employee’s
behavior, which focuses on examining the problem of human exchange (contract) based on finance and
economics. For the HR department this theory is about understanding the employee’s contract (Wright &
McMahan, 1992, p. 308). Transaction cost theory is used for solving opportunism and rationality in the
contract. Firstly, Opportunism means a contract between parties behave as self- interest, a firm must
provide safeguards in the contract as guarantee to be sure that the parties will not tend to act in self-interest.
Secondly, rationality means that the contract has no enough information and disable company to make the
right decision because the lack of adequate information (Williamson, 1994, P. 81).
Agency Theory
Agency theory uses to understand situations in which a principal (owner) delegate tasks to an agent
(employees) on his behalf include some decision-making authority. This theory is applied to HRM by
reducing the conflicts of interest between principal and agents when responsibility delegated by controlling
behaviors and build employee relations. As Welbourne and Cyr (1996) noted that agency cost will reduce
when the firm is controlled by the owner and conflict of interest eliminated and establish proper incentives
to ensure that the agent will not take harmful action toward principal. Agency cost includes monitoring
cost which directly related to the actions of the agent. Firms managing and monitoring by owner required
low agency cost, but when the firm grows and more agents involve, the monitoring cost increase because
owner becomes less efficient.
Contingency Theory

This theory suggested that in order for firms to be effective, HRM functions must fit with the organization
or external environment aspects to achieve organizational goals. According to Harney (2016) said that
contingency theory within HRM is based on external and internal fit. External fit means HR practices must
fit with the organizational strategy and environment conditions. Internal fits mean HR practices must work
together to deliver the same message and the desired outcome. By using contingency theory, firms can
promote employee behaviors that are matched with business strategy because behavior is the impact of an
employee’s ability and motivation, therefore by implementing HR practices such as promoting policies
which motivate the employee, an organization can influence behavior.
Conclusion
In conclusion, HRM is the ability to use employee’s effectively and efficiency to achieve the organization’s
goal and HRM theories helps HR to achieve this purpose and increase the motivation and commitment of
workers. In this paper discussed nine theories which support HRM functions. The organizational behavior
theory helps HRM to understand of employee’s behavior and explain why certain different behaviors
impact employee’s performance. Motivation theory is about creating a high amount of passion between
employees to obtain the desire goals and address individual needs. The AMO theory paves the way for line
managers to use effective approaches that result in employee motivation using HR policies and practices.
Human capital theory claim that employee education is a key important point for raising productivity. The
resource-based theory is about HRM must know about the company’s sources and capabilities that can be
used for competitive advantage. Institution theory helps HRM to anticipate about environmental
dimensions that has direct impact over organizational structure development. The transaction costs theory
focuses on examining the problem of human exchange based on finance and economics. The agency theory
is important for HRM for solving the conflict between principal and agents. The last theory, contingency
theory focuses of HRM functions must fit with the organization or external environment aspects to achieve
organizational goals
References
Almaaitah, F. M., Harada, Y., Sakdan, M., & Almaaitah, A. (2017), Integrating Herzberg and Social
Exchange Theories to Underpinned Human Resource Practices, Leadership Style and Employee
Retention in Health Sector. World Journal of Business and Management, 3(1), 16- 34. Available
at: http://dx.doi.org/10.5296/wjbm.v3i1.10880

Arulrajah, A. & Opatha, H., (2016), Analytical and Theoretical Perspectives on Green Human Resource
Management: A Simplified Underpinning. International business research, 9(12), 153- 164.
Available at: http://dx.doi.org/10.5539/ibr.v9n12p153
Bos-Nehles, A. C., Riemsdijk, M., & Looise, J., (2013). Employee Perceptions of Line Management
Performance: Applying the AMO Theory to Explain the Effectiveness of Line Managers' HRM
Implementation, Human Resource Management, 52(6), 1–17.
Delery, J. and D. Doty (1996), Models of theorizing in strategic human resource management: tests of
universalistic, contingency and configurational performance prediction, Academy of
Management Journal, 39(4), 802–835.
Evans, S., & Tourish, D., (2016), Agency theory and performance appraisal: How bad theory damages
learning and contributes to bad management practice, An Article in Management Learning, 1- 21.
https://www.researchgate.net/publication/309471081
Fix, B., (2018), The Trouble with Human Capital Theory, Real-World Economics Review, World
Economics Association, Bristol, Issue no. 86, Pp. 15-32. http://bnarchives.yorku.ca/568