Can Effective Human Capital Management Lead to Increased Firm Performance?
The objective of this paper is to study the impact of human capital resources policies on firm performance. To that end, we formulate four hypotheses which rest on the argument that effective human capital management can lead to increased firm performance. These hypotheses are tested by using a new indicator of human capital, as well as two other measures, namely Tobin's Q and total return to shareholders (TRS). The empirical results, derived from a survey carried out in the year 2000 to senior executives working in 405 North-American firms, indicate that effective human capital management leads to higher employee satisfaction, which, in turn, implies higher customer loyalty. Moreover, we have also found that this higher customer loyalty implies better firm performance in terms of both Tobin's Q and TRS